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Table of Contents i

Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5by Pablo Gutman

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7by Pablo Gutman

Why focus on long-term financing for sustainable natural resource management? . . . .7

Financing for whom and for what? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Potential users and uses of this survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

What is in the survey? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Some survey findings and lessons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Five common-sense principles when considering financing for SNRM . . . . . . . . . . . . .11

Section 1. Financing Options: A discussion . . . . . . . . . .13

1. A Survey of financing options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15by Pablo Gutman

What is the scale of applicability? Projects, programs, sectors, and more . . . . . . . . . .15

Financial requirements and financing options in general . . . . . . . . . . . . . . . . . . . . . . . .15

Financial requirements and financing options in SNRM . . . . . . . . . . . . . . . . . . . . . . . . .17

A checklist of 52 financing options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

You may need less money than you think . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Financing from public budgets, taxes, and revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Banks and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Multilateral and bilateral donors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Private not-for-profit sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Private for-profit sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Payments for environmental products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Payments for environmental services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

International systems of payments for the environmental commons . . . . . . . . . . . . . .26

TABLE OF CONTENTS

From Goodwill to Payments for Environmental ServicesA Survey of Financing Options for Sustainable Natural Resource Management in Developing Countries

edited by Pablo Gutman

MACROECONOMICSFOR SUSTAINABLE DEVELOPMENT

PROGRAM OFFICEM/P/ODecember, 2003

2. A closer look at payments and markets for environmental services .27by Maryanne Grieg-Gran and Camille Bann

Overview of the main types of environmental services . . . . . . . . . . . . . . . . . . . . . . . . .28

Carbon sequestration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Watershed protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Landscape beauty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Biodiversity conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Implications of PES and MES for SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Implications of PES and MES for poverty reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Actions to ensure that MES are pro-poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

The sustainability of PES and MES as financing mechanisms . . . . . . . . . . . . . . . . . . . . 38

When should a project developer choose a MES approach? . . . . . . . . . . . . . . . . . . . . . .39

3. A closer look at private sector–community partnerships . . . . . . . . . .41by Maryanne Grieg-Gran and Camille Bann

Partnerships as a financing mechanism for SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

What motivates companies and communities to form partnerships? . . . . . . . . . . . . . .42

Types of partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Implications for SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Social impact of partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

Sustainability of partnerships as a financing mechanism . . . . . . . . . . . . . . . . . . . . . . .48

Actions to encourage successful partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Some steps in negotiating the terms of a partnership . . . . . . . . . . . . . . . . . . . . . . . . . .50

When should a project developer choose a partnership approach? . . . . . . . . . . . . . . . .54

Community characteristics that are important to the design of the partnership . . . . . .55

Company characteristics that are important to the design of the partnership . . . . . . .56

4. Financing for SNRM: From goodwill to payments for environmentalservices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57by Pablo Gutman

Shifting the approach to financing SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

New financing instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

Less money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

Financing conservation, rural poverty alleviation, or both? . . . . . . . . . . . . . . . . . . . . . .58

ii From Goodwill to Payments for Environmental Services

Table of Contents iii

Section 2. Financing Options: A Description . . . . . . . . . .61

5. Financing Options. The Description Cards (DC) . . . . . . . . . . . . . . . . . .63by Pablo Gutman

List of financing options and where to find them in the description cards . . . . . . . . . .63

Description Card 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

Public budget funding of SNRM projects and programs

Earmarking for SNRM financing a percentage of one or more general taxes

Special laws delivering extra-budgetary financial support

Tax breaks or subsidies for SNRM activities


Earmarking for SNRM financing a percentage of one or more selective taxes

Earmarking for SNRM financing a percentage of one or more charges, fees, fines, andpenalties


National, state, and local development banks’ loans

International development banks’ loans

Commercial banks' loans


Debt-for-nature swaps

Environmental funds (endowment, sinking, and revolving)


Multilateral aid and development agencies

Bilateral aid and development agencies


Freeing up existing public resources

Encouraging the mobilization of private resources

Mechanisms to increase the accessibility to and reduce the need for and cost of financing


Community self-support groups and other forms of social capital

Secular and faith-based charities


Special fundraising campaigns

Merchandising and good cause marketing

Lotteries

WWF–Macroeconomics Program Office, August 31, 2003


Social and environmental NGOs

Foundations

Description Card 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83

Household savings and labor assets

Community-based enterprises

Micro-saving, micro-credit, and micro-insurance

Semiformal and informal micro-finance institutions

Private investment by local businesses


Direct investment by nonlocal investors

Private-public partnerships

Private sector–community partnerships

Compensatory environmental investment of large developments

Venture capital

Portfolio investors (green funds)


Markets for organic agricultural products

Markets for sustainably harvested non-timber forest products

Markets for certified forest products

Markets for certified fishery products


Markets for biodiversity conservation and bioprospecting

Markets for carbon offsets

Markets for watershed protection

Markets for landscape beauty, including ecotourism and tourism

Markets for development rights and conservation easements

Quasi-markets and non-market systems of payments for environmental services


Resource extraction charges directly collected by the SNRM project

Allocating part of national, state, or local extraction fees to SNRM projects in the extractionareas

User fees and entry fees directly collected by the SNRM project

Allocating part of national, state, or local user fees to SNRM projects

iv From Goodwill to Payments for Environmental Services

Table of Contents v


GEF payments for the global commons

Funds for SNRM associated with international treaties

Other possible systems of international payments for global commons

Earmarking for SNRM part of one or more international taxes

6. Case studies of financing for SNRM . . . . . . . . . . . . . . . . . . . . . . . . . .95by Camille Bann, Tom Blomley, Therese Brinkate, Lars Christensen, , Maryanne Grieg-Gran, SørenHastrup, Andreas Jensen, Karsten Raae, and Chado Tenzin

Bhutan—The Biological Corridor Landscape Project . . . . . . . . . . . . . . . . . . . . . . . . . . .97

Bolivia—Noel Kempff Climate Action Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100

Brazil—The ICMS Ecológico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102

Ecuador—Andean Participative Forest Development Project . . . . . . . . . . . . . . . . . . . .106

Ecuador—Pimampiro payments for watershed services scheme . . . . . . . . . . . . . . . . 109

Malawi—Lake Chilwa Wetland Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111

Namibia—The Torra Conservancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115

South Africa—The Green Trus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117

South Africa—Outgrower schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120

Tanzania—MEMA project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122

Uganda—Mgahinga and Bwindi Impenetrable Forest Conservation Trust . . . . . . . . . .126

Zimbabwe—CAMPFIRE project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130

7. Accessing resources and references . . . . . . . . . . . . . . . . . . . . . . . . .135by Pablo Gutman, Nola Chow, and Sarah Janicke

Guides to and resources for financing SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135

Publications on financing SNRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139

Where to contact us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148


ADB Asian Development Bank

AFDB African Development Bank

BCLP Biological Corridor Landscape Project (Bhutan)

BINP Bwindi Impenetrable National Park (Uganda)

CAMPFIRE Communal Areas Management Programme for Indigenous Resources (Zimbabwe)

CARE Cooperative for Assistance and Relief Everywhere

CBA Cost-Benefit Analysis

CBD Convention on Biological Diversity

CBNRM Community-based natural resource management

CDM Clean Development Mechanism

CEDERENA Corporación Ecológica para el Desarrollo de la Recursos Naturales (Ecological Corporation for Renewable Natural Resource Development -Ecuador)

CGIAR Consultative Group on International Agricultural Research

CI Conservation International

CIFOR Center for International Forestry Research

DC Description card

Danida Danish Agency for Development Assistance. Danish Ministry of Foreign Affairs

DEA Directorate of Environmental Affairs (Namibia)

DESCs District development committee (Malawi)

DFC Desarrollo Forestal Comunitario (Community Forestry Development -Ecuador)

DFID Department for International Development (U.K.)

DPFA Desarrollo Forestal Participative en los Andes (Andean Participative Forest Development project - Ecuador)

DNPWLM Department of National Parks and Wildlife Management (Zimbabwe)

EBRD European Bank for Reconstruction and Development

ECLAC Economic Commission for Latin America and the Caribbean

EDO Environmental district office (Malawi)

EF Environmental Fund

FAO Food and Agriculture Organization

FSC Forest Stewardship Council

GEF Global Environmental Facility

GTZ German Technical Cooperation (Gesellschaft für Technische Zusammenarbeit - Germany)

HIPC Heavily indebted poor country initiative

IAF Inter-American Foundation

ICDP Integrated conservation and development project

IDB Inter-American Development Bank

IDS Institute of Development Studies (U.K.)

2 From Goodwill to Payments for Environmental Services

ACRONYMS AND ABBREVIATIONS

Acronyms and Abbreviations 3

IFAD International Fund for Agricultural Development

ICMS Imposto Sobre Circulação de Mercaderias e Serviços (sales tax – Brazil)

IIED International Institute for Environment and Development

IRDNC Integrated Rural Development and Nature Conservation

IUCN World Conservation Union

IPG Interagency Planning Group on Environmental Funds

JI Joint Implementation

LSCS Local Community Steering Committee (Uganda)

MBIFCT Mgahinga and Bwindi Impenetrable Forest Conservation Trust (Uganda)

MDG Millennium Development Goals

MES Markets for environmental services

MSP Medium-sized project grant program

MWLCT Ministry of Wildlife, Conservation and Tourism (Namibia)

NIS Newly Independent States (former Soviet Union countries)

NKMCAP Noel Kempff Mercado Climate Action Project (Bolivia)

NR Natural resource

NTFP Non-timber forest product

ODA Official Development Assistance

ODI Overseas Development Institute

PCF Prototype Carbon Fund

PES Payments for environmental services

PROFOR Program on Forests

RFF Resources for the Future

SFM Sustainable forest management

SNRM Sustainable natural resource management

TSA Technical Advisory Service (at the Danish Ministry of Foreign Affairs)

UN United Nations

UNDP United Nations Development Programme

UNEP United Nations Environment Programme

USAID United States Agency for International Development

USIJI United States Initiative on Joint Implementation

VAT Value-added tax

WCS Wildlife Conservation Society

WSN’s Wilderness Safaris (Namibia)

WWF-MPO WWF Macroeconomic for Sustainable Development Program Office


Preface 5

During the first half of 2003, a teamcomprising staff from the WWFMacroeconomics for Sustainable

Development Program Office (WWF-MPO); theDanish Agency for Development AssistanceTechnical Advisory Service, Environment andNatural Resource Program (Danida, TSA 6); theInternational Institute for Environment andDevelopment (IIED); and Danida’s WorkingGroup on Sustainable Financing of NaturalResource Management reviewed financingoptions available to developing countries to payfor sustainable natural resource managementprojects and programs.

Each participant brought to the table different butcomplementary concerns. Danida was interestedin producing a short guide for its own staff andfor developing-country practitioners that wouldpresent as many financing options as possible,and highlight valuable experiences amongDanida’s focus countries. WWF was interested inexploring how financing for sustainable naturalresource management (SNRM) has evolved andwhat these changes would entail with regard tothe conservation movement and rural communi-ties in the developing countries where WWF ispresent.1 IIED was interested in disseminating thefindings of several of its recent reviews of experi-ences with payments for environmental servicesand private business-community partnerships.Concerns among members of Danida’s WorkingGroup on Sustainable Financing ranged from howthe local or national context may condition thechoice of financing options, to the potential of newfinancing options, to highlighting the Danishexperience in financing SNRM projects in devel-oping countries.

The present report, and the accompanying elec-tronic and training materials are the product ofthis endeavor, and provide:

• A user-friendly entry point to 52 financingOptions for SNRM, together with clear indica-tions of where to go next, either for more in-

depth information and analysis, or to contactpeople from the financing sources themselves.

• A brief discussion and description that high-lights which financing options might be moreaccessible to poor rural communities, or offermore opportunities for projects and programs tosimultaneously address rural livelihood improve-ments and natural resources conservation.

• A summary of ongoing experiences anddiscussions regarding financing SNRMthrough payments for environmental services(PES) and private business-community part-nerships, which have recently attracted muchattention but whose potentials and limitationsare still a matter of debate.

• A collection of recent SNRM financing casesand experiences, particularly, but not limitedto cases in Danida’s focus countries and coun-tries where WWF is working.

• Web addresses to access many of the institu-tions and references mentioned in the survey,and a forthcoming powerpoint presentation (inthe training material) that can be used as a self-tutorial or as an aid for a half-day trainingsession.

This report is a composite of many contributions.Maryanne Grieg-Gran and Camille Bann fromIIED are the authors of chapters 2 and 3 and alsocontributed several case studies to chapter 6.Other case studies were prepared by LarsChristensen, Søren Hastrup, and Karsten Raae, allof whom are members of Danida’s Working Groupon Sustainable Financing. Still other case studiescame from Tom Blomley (CARE International),Therese Brinkate (WWF South Africa), AndreasJensen (Danida), and Chado Tenzin (WWF


PREFACE

1. In recent years Danida’s focus countries have included Bangladesh, Benin,Bhutan, Bolivia, Burkina Faso, Egypt, Ghana, Kenya, Mozambique, Nepal,Nicaragua, Tanzania, Uganda, Vietnam, and Zambia. Additionally, the followingcountries are also recipients of Danish environmental assistance: BotswanaCambodia, Ecuador, Laos, Lesotho, Malaysia, Namibia, South Africa, Swaziland,Thailand and Peru. WWF supports conservation and sustainable naturalresource management in over 70 developing countries.

Bhutan). Pablo Gutman (from WWF-MPO) wrotethe remaining chapters and edited this report andthe related electronic materials.

Three meetings with Danida’s Working Group onSustainable Financing provided the venue forlively discussions and many suggestions. Severalof the contributors mentioned above attendedthese meetings, as well as Anders Billeschou,Hanne Grolin, Michael Lindall, Michael Pearson,Christian Prip, Poul Buch-Hansen, John Carlsen,Thorikil Casse, Knud Elverskov, Martin Enghoff,Sven Hindkjær, Carsten Kaspersen, JohnKorenerup-Bang, Jørgen Korning, Ole Mertz,Helle Munk Ravnborg, Niels Palmvang, KarinSchultz, Sten Sverdrup Jensen, and AndrewWardell. Valuable comments were provided byLars Eskid Jensen, Herik Lerdof, KarstenGasseholm, Ole Stubodrup, and Bo Shultz, all of

whom are with Danida’s overseas programs, andby Nola Chow. The support of WWF-MPO staff ingeneral and of Sarah Janicke in particular is alsoacknowledged.

Kim Carstensen of WWF-Denmark brokered thiswhole project and saw it through its launch. HansHessel-Andersen and Andreas Jensen fromDanida’s Environment and Natural Resourcesprogram brought Danida’s interest and support tothe project. As Danida’s officer overseeing theproject, Andreas became a key partner and animportant contributor. The project was directedby Pablo Gutman from WWF-MPO and was madepossible by the financial support of Danida andWWF-MPO.

Pablo GutmanDecember 2003


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Summary 7

Why focus on long-term financing forsustainable natural resource management?

To many development and conservation practi-tioners, a discussion of financing issues in naturalresource management (NRM) is like putting thecart before the horse: “Where is the focus onpoverty?” “What will happen to biodiversity?”“Does it make economic sense?” “What aboutgender and indigenous people issues?” “Whowants the project, anyhow?” “Has local ownershipbeen considered?” “Have you taken a livelihoodapproach?” “Or would a human welfare ecologyapproach be better?” “Corruption and lack oftransparency will swallow your proposal!” Theseand many other concerns are worthwhile issuesin rural development and conservation, and theimplicit message is, “Why discuss financingissues when more important concerns need to beaddressed beforehand?”

It is true that no amount of financing will secure aproject’s success. Yet the lack of adequatefinancing will surely doom the best-crafted initia-tive. This apparent contradiction simply points tothe fact that adequate financing—in terms ofamount, conditions, and timing—is a necessitybut not a sufficient condition for success. Infocusing on financing issues this survey assumesthat the interested parties have alreadyaddressed, or are simultaneously addressing, themany other concerns that make up a viable andpotentially successful natural resource manage-ment project or program.

Then, even if we agree on the importance offinancing for SNRM, why open a discussion aboutit? First there is the availability issue. Securingfinancing for SNRM projects is becoming increas-ingly difficult, as can be seen in the 1990s’ world-wide downward trend of investment in ruraldevelopment and conservation by countries,donors, and development banks. Hence, SNRMpractitioners need to be more innovative andsystematic in their search for financing options.

Second: the issue of new financing options. Inspite of resources for SNRM drying up orperhaps because of it, since the 1990s newapproaches to financing for development andsustainable natural resource management havebeen advocated. They include ecotourism,markets for green products, payments for envi-ronmental services, local-scale community-basedNRM, environmental funds, internationalpayments for carbon sequestration, the provisionof global commons, and many more. At times, thesame approach has been touted by some as bestpractice while dismissed by others as inconse-quential.2 With all of these new financing optionsthere is room for discussion and learning.

Third: despite financing’s critical importance,most SNRM projects and programs still give onlycursory attention to financing prospects beyondthe implementation period. In a review of seven ofDanida’s SNRM projects we found that five didnot go beyond mentioning the amounts thatDanida and the country’s government wouldcontribute to implement the project. Only twoproject documents added that the country’sgovernment would increase its funding asDanida’s support phases out. Only one projectdocument discussed the challenges of securinglong-term financing, but did not advance anyproposal as to how those challenges could be met.A similar review of 20 WWF-sponsored SNRMproject documents fared only marginally better.This disregard for long-term financing issues islimited to neither Danida and WWF nor to NRMprojects. In a recent OECD review of 66 develop-ment projects only one was found to discuss theproject’s financing sustainability.3 There is a clearneed to improve awareness of and literacy onsustainable financing issues and options amongSNRM practitioners.


SUMMARY by Pablo Gutman

2. See, for example, the divergent opinions reported in Pagiola, Bishop, andLandell-Mills (2002); Landell-Mills and Porras (2002); and Spergel (2001).

3. See OECD, 2000, “Donor Support for Institutional Capacity Development inEnvironment: Lessons Learned.” Evaluation and Effectiveness 3. DevelopmentAssistance Committee. OECD, Paris.

Financing for whom and for what?

The sustainable management of natural resourcesis an issue in rich and poor countries alike, andamong large rural businesses as well as amongsmall farmers—hence interesting experiences offinancing arrangements for natural resourcemanagement can be found in many places aroundthe world. Since the focus of this survey is on low-income developing countries, however, we limit ourdiscussion of financing options to those that areavailable to developing countries. Likewise all thecases reviewed are from developing countries.4 Asecond focus is on financing options that are bestsuited to support joint SNRM and poverty allevia-tion initiatives and are more accessible to the ruralpoor. These issues are highlighted in the discussionof each financing alternative reviewed.

Sustainable natural resource management(SNRM) can refer to many types of naturalresources and management strategies. Thissurvey takes a broad approach, and the financingoptions discussed address all three classic SNRMsituations as depicted in figure 1, namely:

• Strictly protected natural resources, such asnational parks and wildlife sanctuaries. Inthese cases the SNRM focus is on the protec-

tion of biodiversity and other importantnatural features. Improvements in localcommunities’ livelihood should be achievedthrough natural resource uses such as recre-ation ecotourism and tourism services, andother activities that do not impinge on theprotected areas.

• Partially protected or unprotected naturalresources of high biodiversity value (e.g.,protected area buffer zones, natural forests,wetlands, coral reefs, coastal areas, and fish-eries). Here there is a wider choice of SNRMalternatives that can increase rural communi-ties’ livelihood while preserving the area’sbiodiversity or even increasing it throughlandscape restoration programs.

• Natural resources of low biodiversity value, en-compassing land devoted to farming, ranching,forest plantations, and secondary forests. This iswhere most human settlements are located andmost rural production takes place. In these casesSNRM is focused on offering rural communitiesproductive ways to increase the income theyobtain from their natural resources, while main-taining the long-term productivity of land andwater, and protecting watershed-related environ-mental services.

These three SNRM cases are archetypesand the task of SNRM practitioners can bemuch more complicated. Nevertheless,the distinction is useful when discussingavailable financing options as they maydiffer from one type of SNRM project tothe other. These issues are also high-lighted in the discussion of each financingoption reviewed.


FIGURE 1. THREE TYPICAL SETTINGS FOR SNRM

Farming Area Buffer area Strictlyprotected

area

4. Nevertheless, many of the financing options discussed hereare relevant both to developing and developed countries.

Potential users and uses of this survey

Throughout the text this survey refers to projector program developers. In all cases these termsare no more than conventional shortcuts to amuch larger array of users, all of which can

benefit from a better understanding of financingoptions for SNRM, as follows:5


Nongovernment project andprogram developers:

• Local communities

• National nongovernmentalorganizations (NGOs)

• International NGOs

Identify potential sources of financing for their project and program proposals, and to adjust them totake advantage of funding opportunities.

DIFFERENT USERS MAY FIND A SURVEY OF FINANCING OPTIONS FOR SNRM USEFUL TO:

Staff of developing countries’government and financinginstitutions:

• Sectoral agencies (e.g., rural development,NR agency, etc.)

• Economic or financialagencies

• Development banks

(a) Identify potential sources of financing for their project and program beyond the agency currentbudgets.

(b) Help review and assess proposals that third parties submit to their agency.

(c) Help design the third parties’ proposals that they will later review. Because staff of agencies and develop-ment banks usually advise their would-be clients, a survey of financing options can be used to improve theproject design and identify opportunities to diversify the financing mix of the proposal.

d) Make their own case. Many government agencies allocate their investment budget through a competitionprocess in which their departments are required to present fully developed proposals including financingschemes. Here a better understanding of financing options can improve the proposal design and the identifi-cation of matching funding sources.

Staff of international agencies,donors and banks:

• United Nations agencies (e.g., UNDP, FAO, UNEP,IFAD)

• Rich country cooperationagencies (e.g., USAID,Danida, DFID, etc.)

• International and regionaldevelopment banks (e.g., WB, ADB, AFDB,IDB, etc.)

• Foundations

(a) Identify potential sources of financing for their project and program beyond the agency’s budgets.Although most of these agencies do not fundraise (some are actually forbidden to do so by their bylaws),some do (e.g., many United Nations agencies) and staff of the latter may use a survey such as this toidentify potential sources of financing for their projects and programs beyond their agencies’ budgets.

(b) Help review and assess proposals that third parties submit to their agency.

(c) Help design the third-party proposals that they will later review. Because the staff of agencies and devel-opment banks usually advise their would-be clients, a survey of financing options can be used to improvethe proposal design and identify opportunities to diversify the financing mix of the proposal.

d) Make their own case. Many international agencies and donors allocate their own investment budgetthrough a competitive process whereby their own departments or units are required to present fullydeveloped proposals including their financing schemes. Here a better understanding of financing optionscan improve the proposal design and the identification of matching funding sources.

5. Similarly, a large array of initiatives beyond projects and programs (e.g., sectorand programmatic initiatives) may be involved; we discuss this in chapter 2.

Summary 9

What is in the survey?

The survey is divided in two sections—the firstdevoted to discussions and the second todescriptions.

Section 1 has four chapters:

Chapter 1 discusses financing issues in a genericinitiative, and the particularities of long-termfinancing for SNRM. It presents and brieflydiscusses 52 financing options. Most of them arecurrently available in most countries (e.g., mobi-lizing local savings, grants, funds, loans, etc.).Some are still in a developmental stage (e.g.,carbon sequestration trade, earmarking nationalor local taxes for SNRM, or developing systems ofpayments for environmental services). A fewothers are still hypothetical (e.g., an internationalsystem of payments for the global commons, aTobin tax on international capital flows, or aglobal energy tax earmarked for SNRM, etc.). Adetailed description of each financing alternativeis left to the “description cards” in chapter 5.

Chapter 2 and 3 discuss in more detail experi-ences with markets for environmental servicesand private sector–community partnerships forSNRM. The discussion is based in recent work inthis field conducted at the International Institutefor Environment and Development (IIED).

Chapter 4 discusses recent trends and offers conclu-sions and recommendations (summarized below).

Section 2 has three chapters:

Chapter 5 presents 15 “description cards” thatbriefly describe each financial alternative; providea qualitative score to their performance regardingseveral concerns (e.g., for which naturalresources, for which project scale, for which typeof stakeholders and transaction costs, etc.); andoffer suggestions on where to go next in order topursue funding from these sources or simplylearn more about them.

Chapter 6 presents 12 case studies that describefinancing arrangements for as many SNRM proj-

ects in developing countries. By examining theorganizational and institutional frameworks of on-the-ground initiatives these case studies provide acontext for some of the financing options discussedin the survey.

Chapter 7 offers links to references and resources,most of which are available online. Its first section,“Guides to and resources for financing for SNRM”lists Web sites and manuals designed to help thepractitioner looking for sources of financing forSNRM. The second section, “Publications onfinancing SNRM” lists literature that reviewsfinancing mechanisms and case studies. In bothsections each entry is accompanied by a shortdescription of what is found in each resource.

Some survey findings and lessons

After a decrease in financing for NRM in the 1990s,there have recently been some encouraging signs associeties in both developing and developed countriesincreasingly recognize the value of sustainablemanagement of crops, watersheds, and forests. Thisprocess has spurred a wider use of traditionalfinancing approaches such as the mobilization of localcommunities’ own resources and growing marketsfor green products and services (e.g., organic cropsand tourism). It has also spurred new financingoptions such as environmental funds; debt-for-natureswaps; payments for nontraditional environmentalproducts and services (e.g., certified forest products,carbon sequestration schemes, and payments forother global environmental commons); and newfinancing arrangements (e.g., private sector–commu-nity partnerships, markets for environmental serv-ices). Furthermore, the Millennium DevelopmentGoals (MDG), which have been at the center ofrecent international development discussions, mayhelp highlight the links between poverty and theenvironment in that MDG's list of goals begins witheradicating poverty and ends with ensuring environ-mental sustainability.

Many challenges remain, however. On top of atighter financing market that affects all kinds ofdevelopment initiatives, some development and


Summary 11

conservation views still oppose the very tenet ofsustainable natural resource management, that is,the advantage of integrating environmental conserva-tion and rural development. On the rural develop-ment and poverty alleviation side, SNRM is at timesdismissed as an extra cost with low returns, or adesirable goal but with a low priority compared toother rural poverty alleviation needs such as health,education, infrastructure, water and sanitation, etc.6

From the conservation side, some have given up onthe integrated conservation and development proj-ects (ICDP) concept of the 1970s, arguing that itcosts too much and delivers few conservationresults. Their solution is that money should be givenup-front to whoever is able to provide conservation.

There is a modicum of truth to these arguments.That is, where there are few natural resources andmany rural people, much more than SNRM will beneeded to reduce rural poverty, although conservingthe scarce natural resources available may still be apriority. Also, where there are abundant naturalresources and few people, gazetting new protectedareas and making them off-limits to the local popula-tion may aid in conserving biodiversity, although itmay raise ethical and equity concerns. However,these are extreme situations. The general rule is thatmost rural areas of developing countries are home toboth valuable environments and large numbers ofrural poor, and in these cases the tenet of SNRMholds—we must integrate environmental conserva-tion and poverty eradication.

Advancing this perspective requires much inge-nuity and multitasking on the part of SNRM prac-titioners. First, it requires designing NRMprojects that balance short-term poverty reduc-tion needs with long-term sustainability of naturalresources. Second, it requires convincing advo-cates of one or the other that there are goodopportunities to jointly foster both. Last but notleast, this perspective requires exploringfinancing arrangements that have a good chanceof being both sustainable and accessible to therural poor in developing countries. Box 1suggests some common-sense principles to helpin this endeavor.7


BOX 1. FIVE COMMON-SENSE PRINCIPLES WHENCONSIDERING FINANCING FOR SNRM

Financing is importantNever undertake an SNRM project before its short-term financingneeds are secured, its long-term financing needs are well under-stood, and it has good prospects.

Financing is not that importantNever undertake an SNRM project simply because the money is available.

Think short and long term Everyone knows that you need to care about a project’s start-upfinancing. Very few are clear why long-term financing should be anissue, considering that no one can know for sure what will happen inthe future. Actually understanding long-term financing prospects is notabout knowing what the future will be but what the future may be, soas to better prepare the project or program to cope with an uncertain future.

Financing is not an add-on or a “one size fits all”It is an integral part of the project design. To a large degree,financing arrangements are case- and context-specific. Thefinancing mix may affect issues such as ownership, dependency,equity, risk taking and risk sharing, income generation, and more.A mismatch between the project design and the project financingwill lead to problems down the road. Mismatches may result froman SNRM project developer's lack of financial understanding, asmuch as from a financing expert's lack of understanding of theproject’s goals and context.

Financing SNRM projects requires more thinking than it used toThis is because there is a tendency to need multiple sources offinancing, and because new financing options are more complexthan traditional ones. Compare, for example, a simple grant-supported project with the complexities of a project entailingpayments for environmental products and services, or a privatesector–community commercial partnership.

6. A good example is the lack of consideration given to environmental and naturalresource–related issues in some of the poverty alleviation literature and plansof the last decade: For example, in the World Bank's 2000/2001 WorldDevelopment Report, “Attacking Poverty” neither natural resources nor theenvironment make it to the table of contents.

7. In a complementary approach the participants in Danida’s Working Group onSustainable Financing have put together a list of “Guiding Questions” (availablefrom Ole Meretz [[email protected]] or Karsten Raae [[email protected]]).

SECTION 1.F INANCING ALTERNATIVES: A DISCUSSION

Section 1. Financing Alternatives: A Discussion 15

What is the scale of applicability? Projects, programs, sectors, and more

Once upon a time “a project” was the main unit ofdesign and discussion in the development andconservation world. That is no longer the case.Practitioners have scaled up from projects toprograms. Governments and funding organiza-tions have gone further, moving up from projectfunding to program funding, to sector funding, toprogrammatic funding, and finally to budgetsupport. Although some disagreement regardingterminology exists, for the purposes of thissurvey:

• A project is an integral set of steps to delivera specific product (e.g., from building a ruralschool to building a large dam)

• A program is a set of related projects andactivities that together deliver a broadproduct or goal (e.g., a countrywide agricul-tural extension program, a program to createa national system of protected areas, etc.)

• Sector funding is the financing of a slice of asector’s programs over a specific period oftime (e.g., financing for the budget of therural agency, or the health agency). Thedeliverable is often measured in terms ofachievement of objectives and milestones

• Programmatic funding, in the World Bankjargon, is funding for a program that cuts acrosssectors (e.g., a program to reduce poverty,which may entail projects related to health, ruralproduction, infrastructure, education, etc.).

• Budgetary support (also called institutionalsupport or unrestricted funding) usually refersto the financing of a slice of a government orinstitution budget over a period of time. Thedeliverable is often measured in terms ofachievements of goals and milestones.

Moving from projects to programs, to sectorfunding and so on, entails more than a change ofscale. For example, as deliverables move from aspecific product to broader goals the need for

monitoring increases since longer and more ambi-tious initiatives usually require adjustments andchanges down the road. This dovetails well withlong-term financing concerns where the needs formonitoring and adaptation are also high.

Among the financing instruments reviewed in thissurvey are some that can be used to support all ofthe types of intervention levels described aboveand others that are better suited to financing onlysome of them. In most cases we use the terms“project” or “program” to refer in general to thelarger list of projects, programs, sector funding,programmatic funding, and budgetary support.

Financial requirements and financingoptions in general

Financial issues in most projects or programsrelate to: (a) assessing the financial requirementsof the project, that is, knowing how much andwhen money will be needed to put the project inplace and keep it going; (b) financing, whichconcerns knowing where and how to get theneeded money; and (c) financial planning, whichencompasses both (a) and (b).

Figure 2 illustrates the financial requirements atthree characteristic stages of most projects orprograms: the initial investment requirements,operation costs, and the periodical replacementcosts (boxes a, b, and c, respectively). To a goodextent a project’s financial requirements—theamount of money and the dates when it isneeded—are related to the costs of the inputs itrequires. But the financial requirements could besmaller or larger than the cost of these inputs.For example, some of the inputs may be suppliedin-kind by project participants (e.g., farmer’slabor, public lands, technical support from exten-sion agencies, etc.), and would therefore notappear among the financial requirements (box d).8

Furthermore, some of the financial requirementsare not related to the project inputs but to financial


CHAPTER 1. A SURVEY OF F INANCING ALTERNATIVESby Pablo Gutman

8. Some accounting approaches would assign a monetary value to the in-kindinputs to arrive at a financial grand total, and then subtract them to come upwith the financial needs.

arrangements themselves, such as the payment ofloan interest (box e).

All projects require external support. This isneeded for everything from the roads necessaryfor bringing commodities to the market to exten-sion services that foster new conservation tech-niques among farmers, to institutions to protectrights and enforce rules (box f). If the project inquestion makes a small demand on externalsupport activities already in place, the projectdesigners may well take them for granted. On theother hand, if the project entails large demands onexisting facilities and services, or if new ones arerequired, their cost should be included as part ofthe project’s financial requirements.

To the extent that supporting activities provideresources and services to the project for free theyrepresent positive externalities benefiting the

project in question; and the project may recipro-cate with positive externalities of its own (e.g.,increasing the level of education or training of thelocal community, etc.). On the other hand, someprojects may result in negative externalities, suchas forced relocation of communities, loss ofcustomary access to natural resources, environ-mental losses, etc. (box g). These costs should beacknowledged and included in the project’s costsand the affected parties should be duly compen-sated (internalizing the externalities in economicparlance). Once the project’s financial require-ments are assessed, different financing optionscan be explored. Financing is about knowingwhere and how to get the money needed toinitiate and support a project. In a nutshell thereare only three alternatives, as depicted in figure 3:(a) use the internal money, that is, the money of


FIGURE 2. ASSESSING THE FINANCIAL REQUIREMENTS OF A PROJECT

(e) There may be additional financialneeds related to the project’s financialarrangements, such as interest on loans

(a) Fundingrequirements toinitiate the project

(d) In allsteps in-kind inputswouldreduce theproject’sfinancialneeds

(f) Other activities, services,infrastructures, and institutionsmay be needed to support theproject or program, incurringadditional financing needs

(g) The project may entailnegative externalities (e.g.,social and environmentalimpacts) that need to beincluded among the costs

(b) Moneyneeded to payfor the year-to-year costs

(c) Moremoney neededhere

Undertaking aproject or program Operation Periodical

overhauling


the project participants (e.g., the farmers' savings,the participant agencies’ regular budgets, andother local stakeholders’ money); or (b) pursueexternal funds such as a loan, a grant from thenational or regional government, or any othersource external to the project participants; or (c)use the funds the project itself creates, usually byproducing and selling goods and services.9

Although, at this basic level, financing may seemstraightforward, it is actually quite complicated.There is a multitude of different financing optionsand pursuing one, or a combination of severalrequires understanding the pros and cons ofeach, and how they match the project’s character-istics and needs.

Financial requirements and financingoptions in SNRM

Compared with other types of development proj-ects or business undertakings, SNRM projectsand programs feature some specific traits:

• Some benefits may take an exceedingly longterm to materialize. Even in cases in whichbenefits may rapidly appear, such asprotecting endangered species from extinc-tion, these benefits only make sense if theyare maintained in the long run. Hence, short-term financing may not suit an SNRM project;

• Some natural resources, and their services,such as biodiversity, face imperfect marketsor lack markets altogether.10 As a result, theyhave no market prices—or the existing pricesmay grossly undervalue the natural resourcein question. This in turn complicates securingfinancing for SNRM;


FIGURE 3. FINANCING: THE THREE BASIC OPTIONS

9. This alternative will not kick in on time to cover the initial costs; that aspectwould still need financing, but in some cases the prospect of future earningsmay attract would-be financiers, and if profits are realized they may be used topay these investors back.

10. In economic jargon imperfect or nonexisting markets are called market failuresand may arise from incomplete markets, externalities, nonexclusion, nonrivalry,nonconvexity, and asymmetric information, (Hanley, Shogren, and White, 1997,Environmental Economics in Theory and Practice. London: Basingtoke.)

Initial moneyneeded to startthe project

Money needed topay the yearlyoperation costs

Money needed topay the periodicoverhauling costs

(a) Use internalfinancial resources(e.g., participantssavings)

(b) Use financialresources fromoutside (e.g., loans,grants, and privateinvestors)

(c) Create new financialresources (e.g., byproducing and sellinggoods and services)

• Some natural resources and their services arepartially or wholly public goods.11 Public goodsare available to all in that no one can beprevented from using them (e.g., clean air) sothere is very little incentive for an individual tovoluntarily pay for them. In these cases theremay be little or no monetary benefit for theinvestor or the would-be financier.

For these and other reasons financing SNRM mayhave special needs that call for one or the othertype of financing. Therefore it is important tokeep abreast of the options available and theirpros and cons, which are discussed below.

A checklist of 52 financing options

Table 1 presents 52 financing options for SNRMprojects or programs, grouped into six categories:(1) public sources, (2) private not-for-profitsources, (3) private for-profit sources, (4)payments for environmental products, (5)payments for environmental services, and (6)“you many need less money than you think.” Thematrix format helps show that many financingoptions may be classified under more than one ofthese six categories.

A list tends to be read as an “either or” menu,which should not be the case here, particularly ata time when “leverage,” “partnership,” and“matching funds” are popular catch phrases. Withfew exceptions, financiers prefer not to go into aproject alone. Rather, they see their contributionas a way to leverage or mobilize other parties’resources. Hence, almost every SNRM projectrequires a combination of financing instruments:credits, plus grants, plus public money, plus localsavings, and so on.

The majority of financing options discussed in thefollowing chapters is currently available in mostcountries (e.g., mobilizing local savings, grants,

funds, loans, etc.) Some others are still in theirearly development stage (e.g., trade on carbonsequestration, or developing systems of paymentsfor environmental services). A few others are stillconceptual but nonetheless merit discussion (e.g.,an international system of payments for the globalcommons and a global energy tax earmarked forenvironmental projects). The discussion anddescription of the financing options in the tableproceeds as follows:

• In the rest of this chapter we briefly discussthe six main groups of financing optionsmentioned above.

• Chapters 2 and 3 present a more detaileddiscussion of potentials and limitations ofpayments and markets for environmentalservices, and private sector–community part-nerships.

• In chapter 6, the 52 financing options arepresented in 15 description cards (DCs). Foreach group of related financing options thedescription card offers a short explanation oftheir main features, rates their suitability withregard to 11 SNRM concerns, and suggests(a) how to contact the funders, (b) where togo for country examples, and (c) where to gofor more information.

“You may need less money than you think” (Financing options 50, 51, and 52 and description card 6)

In most initiatives, and certainly in SNRM proj-ects and programs, there is room to reducefinancing needs, reduce the costs of financing,and increase accessibility to it. This is so muchso that some practitioners refer to “zerofinancing” to describe the opportunities to savepublic or private resources and free them forinvestment in new endeavors.

Much has been said about the advantages ofcutting subsidies to energy and water consump-tion or to agricultural inputs and outputs.According to their advocates such measures mayresult in reduced pressure on the environment


11. Again, in economic jargon a pure public good is one for which consumption isnonrivalrous (one's consumption does not reduce the amount available foranother person to consume) and nonexcludable (it is impossible or very diffi-cult to keep trespassers out).

and natural resources, save public money, andfree resources to invest elsewhere, such as inSNRM projects and programs. For example,some recent estimates of energy subsidies indeveloping countries are as high as 160 billiondollars per year. But these subsidies are concen-trated in a handful of large (e.g., Russia, China,India, Indonesia) or energy-rich (e.g., Saudi

Arabia, Iran) countries (see Pagiola et al. 2002).This large figure, however, is dwarfed by the sizeof agricultural subsidies in the European Union,Japan, and the United States. These agriculturalsubsidies may harm the countries' own naturalresources, and surely harm markets and incomesof developing countries’ farmers.


Mostly public sources

1. Public budget funding of SNRM projects and programs (DC 1)

2. Earmarking for SNRM financing a percentage of one or more general taxes collected at thenational, state, or local level (DC 1)

3. Special laws delivering extra-budgetary financial support to particular social groups, geograph-ical areas, or activities (DC 1)

4. Tax breaks or subsidies for SNRM activities (DC 1)

5. Earmarking for SNRM financing a percentage of one or more selective taxes collected at thenational, state, or local level. (e.g., taxes on alcohol, tobacco, energy, airports, ports, cruiseships, hotel and resorts charges, and others) (DC 2)

6. Earmarking for SNRM financing a percentage of one or more charges, fees, fines, andpenalties related to the use (or abuse) of the natural resource (e.g., water charges, ground-water charges, stumpage fees, and other natural resource extraction fees; hunting fees andentrance and user fees in protected areas; charges on emissions and feedstock, release ordumping of fertilizers and pesticides; charges related to solid waste, toxic waste, and environ-mental fines and penalties; etc.) (DC 2)

7. National, state, and local development banks’ loans (DC 3)

8. Debt-for-nature swaps (DC 4)

9. Environmental funds (endowment, sinking, and revolving) (DC 4)

10. Multilateral aid and aid from development agencies (DC 5)

11. International development banks’ loans (DC 3)

12. Bilateral aid and development agencies (DC 5)

Note: “DC” indicates the description card in chapter 5 where the financing alternative is described in greater detail.

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“You may need less money than you think”

Payments for environmental services

Payments for environmental products

Private for-profit sources

Private not-for-profit sources

Public sources

TABLE 1. A CHECKLIST OF FINANCING OPTIONS

FOR SUSTAINABLE NATURAL RESOURCE MANAGEMENT

FINANCING ALTERNATIVES


Changes in public regulations may also freeprivate resources or encourage would-beinvestors. For example, there is a large body ofevidence supporting the fact that clarifying andsecuring participants’ rights to natural resources

will increase their willingness to invest their owntime and savings in the resources' sustainablemanagement, hence, reducing the needs forexternal financing.

Mostly private for-profit sources

20. Household saving and labor assets (DC 10)

21. Community-based enterprises—formal (co-ops) and informal (DC 10)

22. Micro-saving, micro-credit, and micro-insurance (DC 10)

23. Semiformal and informal micro-finance institutions(DC 10)

24. Private investment by local businesses (DC 10)

25. Commercial bank loans (DC 3)

26. Direct investment by nonlocal investors (DC 11)

27. Private-public partnerships (DC 11)

28 Private sector–community partnerships (DC 11)

29. Compensatory environmental investment of large developments (DC 11)

30. Venture capital (DC 11)

31. Portfolio investors (green funds) (DC 11)


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Mostly private not-for-profit sources

13. Community self-support groups and other forms of social capital (DC 7)

14. Secular and faith-based charities (DC 7)

15. Special fundraising campaigns (e.g., “Save the pandas,” “Friends of the national park,” etc.)(DC 8)

16. Merchandising and good cause marketing (DC 8)

17. Lotteries (DC 8)

18. Social and environmental NGOs (DC 9)

19. Foundations (DC 9)

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While eliminating developing and developedcountries’ harmful subsides may be beyond thescope of most NRM initiatives, there are otheropportunities, at the program or project level, toreduce cost and increase access to financial

resources. Several of them are presented indescription card 6 (e.g., pooling, insurance, guar-antees, leverage, charettes, financial training).The main lesson here is that it pays to go over theinitial financing assessment, think creatively, and

Mostly payments for environmental products

32. Markets for organic agricultural products (DC 12)

33. Markets for sustainably harvested non-timber forest products (DC 12)

34. Markets for certified forest products (DC 12)

35. Markets for certified fishery products (DC 12)

36. Resource extraction charges directly collected by the SNRM project (DC 14)

37. Allocating part of national, state, or local extraction fees to SNRM projects in the extractionareas (DC 14)

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Section 1. Financing Options: A Discussion 21


Mostly payments for environmental services

38. Markets for biodiversity conservation and bioprospecting (DC 13)

39. Markets for carbon offsets (DC 13)

40. Markets for watershed protection (DC 13)

41. Markets for landscape beauty, including ecotourism and tourism (DC 13)

42. Markets for development rights and conservation easements (DC 13)

43. Quasi-markets and non-market systems of payments for environmental services (DC 13)

44. Users fees and entry fees directly collected by the SNRM project (DC 14)

45. Allocating part of national, state, or local user fees to SNRM projects in the area providingthe environmental services (DC 14)

46. Global Environmental Facility (GEF) payments for the global commons (DC 15)

47. Funds for SNRM associated with international treaties (DC 15)

48. Other possible systems of international payments for global commons (DC 15)

49. Earmarking for SNRM part of one or more international taxes (DC 15)


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(cont'd.)


ask for advice—because it is probable that youmay need less money than you think.

Financing from public budget, taxes, andrevenues(Financing options 1–6 and description cards 1 and 2)

Public money is the largest source of financingfor SNRM throughout the world, and probablywill remain so for a long time. There are manyarrangements by which SNRM initiatives mayreceive public funding, and we go over six ofthem in description cards 1 and 2. They rangefrom annual budgetary allocations, to SNRMfinancing through earmarking a portion ofgeneral or specific taxes, to special laws andfunds, and to financing SNRM throughearmarking a portion of the fees, fines, and penal-ties related to the use (or abuse) of naturalresources.

The latter—financing SNRM from fees, fines, andpenalties related to the use (or abuse) of naturalresources—is particularly attractive in that a clearcause-effect relation can be advocated in supportof it. However, it may not be free of problems if it

negatively impacts the rural and urban poorwhose livelihood in many cases depends on freeor low-cost access to natural resources.

There is a trend in some quarters to label “finan-cially unsustainable” any project or program thatdepends on the public budget rather than market-based financing, the latter touted as more sustain-able or truly sustainable. This is simply not true.Depending solely on public money may not bewise and surely is not sufficient to pay for SNRMrequirements in most countries. But markets fluc-tuate widely and businesses come and go muchfaster than public budgets.12

Also in many SNRM initiatives public sectorparticipation is not sought after solely as a poten-tial funder, but also as a potential provider of legaland institutional support and as an enabler andfacilitator. Some amount of public funding waspart of half the cases discussed in chapter 6, andin all of them the public sector played an impor-tant supporting role.


Mostly reducing the need for additional financing

50. Freeing up existing public resources (e.g., redirecting money from harmful public subsidies toSNRM projects) (DC 6)

51. Encouraging the mobilization of private resources (e.g., securing tenure, promotion, regulationstreamlining) (DC 6)

52. Mechanisms to increase the accessibility to and reduce the need for and cost of financing(pooling, insurance, guarantees, leverage, charrettes, financial literacy training) (DC 6)


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(cont'd.)


12. For example, in the United States, 8 out of 10 start-up businesses close up shopby their fifth year.


Banks and loans

(Financing options 7, 11, and 25 description card 3)

Development banks, both national and interna-tional, are an important source of SNRMfinancing owing to their special focus on develop-ment lending, long-term loans, and lower interestrates. In middle-income and large developingcountries, national, state, and local developmentbanks are the major source of developing lending,while international development banks' lending ismore important for low-income developing coun-tries. Besides their direct financing role, interna-tional development banks, particularly the largerones (e.g., the World Bank and the four regionaldevelopment banks) are important sources oftechnical advice, fund leverage capability, andpolicy development, making them—for better orfor worse—major reference points for rural devel-opment and conservation.

In contrast to development banks, commercialbanks thus far have played a limited rolefinancing SNRM projects in developing countries.Both banks and would-be borrowers have beenwary that high risks and long maturing periods ofSNRM projects may make them unfit for commer-cial bank loans. Yet there are examples in whichcommercial banks have participated in financingSNRM projects as intermediaries to disbursepublic moneys and also as co-lenders or lenderswhere collateral, government warranty schemes,and pooling money from several sources reducesthe risks both for lenders and borrowers. Aninteresting developing-country experience withcommercial-bank lending for SNRM is Brazil’s“Green Protocol,” a description of which may befound in Bayon (2002). Looking ahead, some newfinancing arrangements such as privatesector–community partnerships (discussed inchapter 3) may open new opportunities tocommercial banks' financing of SNRM.

Multilateral and bilateral donors

(Financing options 10 and 12 and description card 5)

Most multilateral aid and development agenciesare part of the United Nations (UN) family. TheUnited Nations Development Programme(UNDP) is the UN’s overall development agency,and the UN also has several agencies with aspecific focus on natural resources. Among themare the Food and Agriculture Organization (FAO),the International Fund for AgriculturalDevelopment (IFAD), and the United NationsEnvironment Programme (UNEP). IFAD hasresources to grant funds but that is not the casewith UNDP, FAO, and UNEP, which are usuallylow on funds. The UNDP also manages otherdonors’ grants and programs. Similarly to inter-national development banks, UN agencies areimportant sources of technical advice, and theymay help leverage third-party financingresources.

In addition to funding multilateral agencies, richcountries channel much of their international aidand development grants on a bilateral, country-by-country basis, and through their own develop-ment agency, which in most cases is part of theforeign affairs ministry. Bilateral aid is a signifi-cant source of resources in less developed andsmall countries where it may represent a substan-tial percentage of the public investment capacityand of the funds available to NGOs and other civilsociety organizations. There is a sort of divisionof labor among donors with some focusing on aparticular group of countries, or a particulargroup of activities to be supported. There are alsovarious strings attached to bilateral aid that maymake it more or less attractive for a particularSNRM project.

Five of the cases discussed in chapter 6 wererecipients of Danida’s grants and two other caseswere recipients of bilateral aid from the UnitedStates and the Netherlands.



(Financing options 8, 9, and 13–19 and description cards 4,

7, 8, and 9)

Private not-for-profit financing for SNRM includesan array of financing options and arrangementsfrom local communities to international founda-tions and NGOs. It ranges from small in-kindcontributions to substantial investments. Ourchecklist includes eight of these financingoptions, which are reviewed in four descriptioncards in chapter 6.

International NGOs have played an important rolein the development of two relatively new financingoptions: environmental funds and debt-for-natureswaps. National and international foundations arean important source of grants for small andmedium-size projects. Secular and faith-basedcharities are often able to reach the more desti-tute people and places. They can all be importantbrokers to engage other funding sources as well.

Even in cases in which the financing contributionof not-for-profit sources is small their participa-tion, particularly the participation of locally basedinstitutions, may be crucial to increase localbuying-in and ownership of the SNRM initiative.Private non-for-profit sources helped finance fiveof the cases presented in chapter 6.


(Financing options 20–31 and description cards 10 and 11)

Private for-profit financing also encompasses verydifferent stakeholders and scales. It ranges fromlocal peasants and communities investing theirsavings and labor, to small and medium-size localbusinesses, to large businesses and internationalcorporations.

At the local level, almost all SNRM projects willrequire the investment of participating house-holds’ savings or labor. Oddly, most developmentprojects and programs assume local investmentbut seldom acknowledge and quantify it in the

project design. Two of the cases reviewed inchapter 6 do so. Beyond the financing require-ments, mobilizing participant resources is crucialto the local ownership of the SNRM project.Experience shows that in order to motivate ruralhouseholds to invest in SNRM, projects need tooffer good prospects of short-term benefits withinthe levels of risk acceptable to the participants.New activities generated by the SNRM projectmay also spur investment by local businesses,ranging from local investments in lodging fortourists to the roadside sale of handicrafts.

At the large-scale end, there are many reasons totry to attract extra-local private investors to thefinancing of SNRM projects in the poor ruralareas of developing countries: they maycontribute resources far larger than those avail-able locally; they may bring much needed tech-nical and commercial knowledge; they can bridgelocal SNRM projects with countrywide or world-wide markets, and so on. There are also legiti-mate concerns regarding large extra-localinvestors. In particular practitioners need to beconcerned about the distribution of costs andbenefits among the would-be partners and alsothe risk of natural resource overexploitation inorder to meet the benefit expectations of both theprivate businesses and the local communities.

Private business financing of SNRM projects inrural areas of developing countries may includedirect investments that take up one or morecomponents of the SNRM project (e.g., the hospi-tality component of an ecotourism project),private-public partnerships (e.g., developingpublicly owned natural resources), or privatesector–community partnerships (e.g., a forestryor wildlife management project). Recent experi-ences with the latter are discussed in detail inchapter 3 and are illustrated by two cases inchapter 6.

A different, more grant-type financing arises whenlarge private developments—such as dams, oiland mining companies—pay for environmental orsocial projects as compensation for the environ-



mental or social disruption they may cause. Yetanother source is private business financing ofenvironmental initiatives as part of its public rela-tion campaign, or its business ethics, as in thecase of the South Africa Green Fund, described inchapter 6.



Financing SNRM projects with the sale of greenproducts is undoubtedly attractive in that it wouldmatch SNRM efforts with markets willing to payfor them. Many examples of successes and fail-ures are available, feeding a lively polemic as tothe potentials and limitations of green products tofoster environmental conservation and improverural livelihoods. There has also been a learningcurve as SNRM practitioners realize the impor-tance of understanding or even creating themarkets and overcoming the institutional andcommercial barriers that may hinder participationof the rural poor in markets for environmentalproducts and services.

The Forest Stewardship Council’s (FSC) effort todevelop a market for sustainably produced woodand wood products is an exciting example. In thefew years since its inception, the FSC has beenremarkably successful in enlisting large woodproducers and users in developed countries. FSCpenetration in developing countries and amongsmall forest owners is still very limited butgrowing. More recently, the FSC experience hasfostered a similar initiative, this one regardingsustainable fisheries.

One drawback of market-based financing thatSNRM project developers should be aware of isthat money will come late in the project cycle,when the goods have been produced and sold.Thus, the need to secure financing for the start-upcosts remains. A project with a very good marketprospect may be able to leverage financing forstart-up costs, but few SNRM projects are willingto repay initial costs out of market sales, instead

they will usually reserve the market incomes topay for operation costs and to increase the partici-pants’ income.



Many SNRM schemes are not economically viablebecause a substantial part of what they woulddeliver are environmental services that are notpaid for, be they at local scale (e.g., soils andwater protection); national scale (e.g., watershedprotection, biodiversity, landscapes); or interna-tional scale (e.g., biodiversity, carbon sequestra-tion). Should these services be accounted for andpaid for, SNRM would be much more attractiveand rewarding to those that bear the cost of it,particularly the rural poor. That is the rationalebehind the many existing schemes of paymentsfor environmental services (PES).

Markets for environmental services (MES) areone type of PES, characterized by their free-wheeling transactions between would-be sellersand would-be buyers of environmental services.That is not to say that governments’ rules andthird-party facilitation do not play an importantrole in establishing and developing MES, consid-ering that no industry would be interested inbuying carbon sequestration rights were it not forthe international treaties and national regulationsthat force them to reduce their carbon emissions.Some PES schemes could be labeled as quasi-markets in that they combine non-market systemson the demand side and market approaches onthe supply side (e.g., Costa Rica's and Colombia'ssystems of PES). Still other PES rely almostentirely on regulatory schemes both on thedemand and on the supply side (e.g., Brazil’sICMS Ecológico). PES and particularly MES arefurther discussed in chapter 2, and chapter 6describes several MES and PES experiences.

Recently, some MES have raised the expectationsof practitioners and, in some cases, been toutedas the new solution to SNRM financing. The


outcome thus far and the estimated prospectssuggest a more cautious attitude—namely, toconsider markets for environmental services asone among many systems of payments for envi-ronmental services, each one with pros and consthat makes it more or less suitable to a particularSNRM project or program.

Similarly to payments for environmental products,in PES schemes the money is received only whenthe service has been provided—and this may taketime. Thus, the need to secure financing for thestart-up costs remains. Very good PES prospectsmay help attract financing for start-up costs,however to this day few start-up costs have beenrepaid out of PES incomes. Typically PES projectshave benefited from other sources of initialsupport and have used the PES to pay for opera-tional costs and to increase participants’ income.

International systems of payments for theenvironmental commons

(Financing options 46–49 and description card 15)

From a worldwide perspective the atmosphere, theoceans, biodiversity, and the tropical forests are allglobal commons, environmental components of theworld’s global public goods. The latter, accordingto a UNDP definition (Faust et al. 2001) are publicgoods whose benefits are strongly universal interms of countries, people, and generations.

As mentioned before, the adequate provision ofpublic goods is always difficult to achieve, and ata national scale it usually requires governmentinterventions to force the beneficiaries to pay thesuppliers (e.g., through regulations, taxes, thecreation of special markets, etc.). Securing theprovision of global public goods on the interna-tional scale is even more difficult since there is noworld authority to regulate, tax, or create marketsworldwide.

Yet there has been progress in acknowledgingand paying for the global commons, mostly, butnot exclusively, through international treaties.The best known case is the Global EnvironmentalFacility (GEF). Created in 1991 and fundedmostly by voluntary contributions from rich coun-tries GEF mandate is to support developing coun-tries' provision of global commons.13 Internationaltreaties have also created mechanisms for thefinancing of global commons that do not entailinternational agencies such as GEF. For example,private trade in bioprospecting and on carbonsequestration is the result of international regula-tions on biodiversity property rights (Conventionon Biological Diversity) and the control of climatechange (Convention on Climate Change).

Beyond the limited resources currently availablefor financing the provision of the global commons,there is an ongoing international discussion thatbegan in the early 1990s regarding what moreshould or could be done. Proposals to raise moneyto pay for the provision of global commons includeinternational environment-related taxes andcharges, such as an international carbon tax, aninternational charge on the use of the ocean, aninternational air transport tax, or an up-front inter-national income tax. Also proposals have beenmade to earmark part of non-environment-relatedinternational taxes, of which the most debated thusfar is the Tobin tax (a tax on international currencytransactions, proposed by the economist and Nobellaureate James Tobin). Although all of these alter-natives may look farfetched their discussionrecently reached the preparatory meetings of the2002 UN Conference on Financing forDevelopment—but facing strong opposition fromOECD countries, they were excised from the finalConference document.


13. The GEF is also the permanent or temporary financing mechanism for theinternational agreements on biodiversity, climate change, protection of theozone layer, and persistent organic pollutants.


The basic principle of payments for environmentalservices (PES) is that those who provide environ-mental services should be compensated for thecost of doing so, whether these are direct costs ofspecific land use practices or more indirect oppor-tunity costs of avoiding certain activities or typesof land use. Payments may be monetary or in-kind, may involve private sector or governmentfinancing, and can be made at local, national, andglobal levels. There are numerous examples ofPES in practice. Lower watershed users may payupper watershed communities for land manage-ment. Governments may give tax breaks topeople setting aside land for conservation. Andcompanies may pay in other countries for activi-ties that provide global environmental benefitssuch as carbon sequestration or biodiversityconservation.15

There are a number of different approaches toPES, some of which are transactions betweenprivate companies or individuals while othershave more government involvement. While theterm markets for environmental service (MES) isapplied by some—for example, Landell-Mills andPorras (2002)—to all of these approaches,others—for example Pagiola et al. (2002)—preferto restrict the use of this term to schemes withthe following key characteristics:

• Buyers and sellers come together on avoluntary basis; and

• Prices are set through the interaction ofsupply and demand.

Some schemes may have various characteristicsof markets in that they allow suppliers of environ-mental services to respond to financial incentivesand decide how much of the service they want tosupply in response to the payment offered. But insome schemes the transaction from the buyerside may not be voluntary. That is the case, forinstance, when a municipality increases the priceof water supply to users in order to paylandowners to conserve forests. The paymentmay also be administratively determined, as whena government agency sets the price. These typesof initiatives can be considered partially market-based but not markets in a strict sense and aretherefore often referred to as PES.

The distinction between PES and MES can berather blurred particularly where markets areimperfectly competitive, involving only one or afew players on either the buying or supplyingside, or where governments are involved as theseller or buyer of environmental services.

There is also a certain degree of overlap betweenthe term PES and the term private sector–commu-nity partnership. Not all such partnerships relateto the financing of natural resource management,but when they do they can often be considered atype of payment for environmental products orservices. This is because they often involve acommunity providing access to land or wildlife orrefraining from activities that detract from conser-vation or landscape beauty in exchange for avariety of inputs from the private sector, bothfinancial and nonfinancial. Direct negotiation isthe most common approach for developing suchpartnerships and much of the research on themhas focused on how to improve this aspect, ratherthan the broader market issues (partnershipapproaches are discussed in chapter 3).


14. This chapter draws heavily on IIED’s recent research in the same subject,particularly by Landell-Mills and Porras (2002) and papers from Pagiola, et al(2002).

15. There is some overlap between markets for environmental products (MEP) andMES; for example, buyers of organic coffee may be paying either for the qualityof the product or for the service of protecting the forest where the coffee wasproduced (or for both).

CHAPTER 2. A CLOSER LOOK AT PAYMENTS ANDMARKETS FOR ENVIRONMENTAL SERVICESby Maryanne Grieg-Gran and Camille Bann / IIED14

In this chapter we examine the experience withdifferent types of PES with a particular focus onmarket initiatives. Except where otherwise stated,the discussion is largely based on Landell-Millsand Porras (2002).

Overview of the main types of environmental services

The four main types of environmental servicesthat have been addressed by PES and MES arediscussed below.16

Carbon sequestration

Forests sequester and store carbon and therebyplay an important role in regulating globalclimate. There are two main approaches toincreasing the amount of carbon sequestered byforests—the planting of new trees (afforestation,reforestation, and agroforestry), and the avoid-ance of emissions by retaining trees (throughactions such as conservation or improvedmanagement practices that prevent or reducedeforestation, forest fires, and conversion offorest to other land uses).

The signing of the Kyoto protocol in 1997 (as partof the United Nations’ Convention on ClimateChange) set the stage for the emergence of amarket for carbon offsets, including those basedon forest sequestration and storage. The carbonoffset market has been evolving quickly. Not onlyare national governments passing laws to ensureemission targets are met, but greenhouse gasemitters, brokers, consultants, NGOs, communi-ties, and potential suppliers are respondingdirectly to international policy processes.However, the process has not been smooth andmany of the initiatives can still be characterized asexperimental, aimed at gaining experience andimproving public image of the companiesconcerned. Nor is there a single unified trading

platform. Rather, transactions have occurred at anumber of levels (i.e., local, national, regional, andinternational), through a variety of paymentmechanisms (from bilateral to exchange based),and with varying degrees of government partici-pation. Trading of forest-based offsets has beenhampered by the uncertainties over the rules atthe international level. Although some clarifica-tion was attained at the Conference of the Partiesin Marrakesh in November 2001, there are stillmany challenging issues, such as determinationof baselines and additionality, that constrain thedevelopment of payment and market systems.Transaction costs are also very high.

The most sophisticated systems are being set upin industrialized countries as a result of concertedgovernment efforts to introduce emission capsand establish clear rules and regulations to guidemarket development. For example, the UnitedKingdom and Denmark have their own tradingsystem. In these countries, ad hoc transactionsaimed at gaining experience and generating favor-able publicity are being replaced with moresystematic trading of a defined carbon commodity(typically one ton of carbon dioxide equivalent),aimed at minimizing the costs of compliance withthe Kyoto Protocol targets.

Developing countries’ participation in theemerging international carbon sequestrationmarket is based in the Joint Implementation (JI)and the Clean Development Mechanism (CDM)of the Kyoto Protocol. Thus far these marketinitiatives have been primarily generated throughcomplex and individually negotiated projects.Investment in the development of an internationalmarket architecture remains limited. The ratifica-tion of the Kyoto Protocol and the inclusion ofmore favorable conditions for forestry, would be agreat impetus to the international market forforest-based carbon offsets.


16. Landall-Mills and Porras review 75 examples of payments for forest-basedcarbon offsets, 61 examples related to the establishment of markets for water-shed services, 51 cases related to landscape beauty, and 72 emerging paymentschemes for biodiversity


In an effort to become market leaders, anincreasing number of organizations (businesses,public agencies, and NGOs) are setting up inter-national brokerage services, investments funds,clearinghouse markets and even exchanges.Insurance companies, consultants, and certifica-tion suppliers have been quick to offer potentialbuyers and sellers services to support interna-tional trade. A number of these ventures cater toforest-based offsets initiatives.

Watershed protection

While forest watershed services vary from site tosite, forests are credited with protecting waterquality, regulating water flows, preventing floods,controlling soil salinization, and maintainingaquatic habitats. Whereas historically the protec-tion of watersheds was the responsibility ofgovernments, the role of private companies, indi-vidual landowners, NGOs, and communities indelivering and financing watershed services isgrowing.

Watershed services generally benefit downstreamactivities and are characterized by thresholdeffects. Owing to these features, market develop-ment depends on strengthening cooperative andhierarchical arrangements to allow the benefici-aries demanding the service and the providers ofthe service to come together to formulate grouppayment strategies and to tackle free-riding. Atthe same time, where cooperative or hierarchicalarrangements exist, and are under strain frominequitable benefit sharing and high costs,markets are being introduced to ease tensionsand facilitate financial and in-kind transfers. Theemergence of markets for watershed services has

not been associated with significant competitionin supply or demand.

A range of watershed service commodities hasdeveloped, depending on the type of servicedemanded. Those interested in maintaining waterquality purchase this service, in some schemes,through best management practice contracts withwatershed landholders, and in others, throughwater quality credits. Water table regulation isbeing commoditized in a number of waysincluding salinity credits, transpiration credits,and stream flow reduction licenses. What land-holders have to do to provide these commoditizedservices varies according to the scheme and theservice but may involve refraining from certaintypes of activity such as pesticide use, maintainingnatural forests or vegetation, or carrying outspecific activities such as tree planting.

Given the large number of stakeholders involvedin watershed protection, payments need to bechanneled through intermediaries, allowingbuyers and sellers to contract out the negotiationsand conclusions of deals, overseeing implementa-tion and enforcing contracts. Intermediaries arealso valuable mechanisms for pooling funds froma group of beneficiaries and/or collecting userfees. In more advanced countries, over-the-counter trading using prepackaged commoditiesis being promoted, in some cases alongside clear-inghouse systems.

Until recently, because of the difficulties ofexcluding non-payers, suppliers of watershedservices have generally lacked leverage fordemanding payment. In more developed coun-tries, new government regulations for improvedwater quality have been the major force behindpayments for watershed protection. Also,improved understanding of the benefits providedby watersheds and the growing threats that theyare facing have increased beneficiaries’ willing-ness to pay for watershed conservation. Ascommodities and payment mechanisms becomeincreasingly sophisticated, supply-driven marketsare no longer improbable.


To give one example of North-South carbon sequestra-tion trade, by September 1999, Climate Care had offset4,335 metric tons of carbon through two investments inUganda. The most important investment is in a FACEFoundation project on Mount Elgon.

It is not clear whether markets provide a prefer-able mechanism for delivering watershed servicescompared to regulatory systems that have alreadybeen tried and tested. For the most part, studiesoffer superficial reviews of economic, social, andenvironmental benefits with virtually no assess-ment of costs. Moreover, scientific uncertaintyremains regarding the forest-hydrology link,which may undermine market development.

Landscape beauty

Landscape beauty has a market that is the mostrecognizable of the four environmental servicesconsidered here, but one that remains relativelyimmature. Generally, there is little effort to setprices for access to landscape beauty according todemand and supply conditions, payment mecha-nisms are unsophisticated, and there is littleparticipation by private and community land-holders. As long as tour agencies resist payingfor landscape beauty, land stewards’ opportunitiesfor being rewarded for the service they providerests in establishing themselves as tourist enter-prises. Yet, without the skills to administer andmanage complex international businesses, thisroute is fraught with difficulties—particularly forpoor people. Some agencies and communitiesbelieve that ecotourism must ultimately involve ajoint effort and the pooling of skills andresources. Whatever the model for landscapebeauty to be protected into the future, it is clearthat providers must receive fair compensation fortheir inputs.

The provision of landscape beauty represents akey attribute in the market for ecotourism.However, payment systems for this service havebeen slow to develop. Tour operators have oftenconsidered landscape beauty as a free input, whileon the supply side, entrance fees for government-controlled protected areas have rarely reflectedconsumers’ willingness to pay for even the costsof management. This has made it hard for privateor community-owned areas of natural beauty tocompete with government-controlled areas.

In this framework market evolution is not asimple process. The introduction of paymentmechanisms where none existed before involvesthe creation of new institutional arrangementsand the involvement of new stakeholders. As touroperators begin to establish themselves as payingcustomers, communities and private landowners


Environmentalists and conservation-minded localauthorities are proposing payments to landowners toprotect the forest cover and therefore maintain orimprove a watershed’s hydrological integrity. Forexample, Malawi’s national electricity supplier hasbeen paying local NGOs since 1994 to protect water-sheds surrounding key hydroelectricity plants toensure protection against sedimentation.

Another example of payments for watershed protectionregards tree planting in salinity-prone areas as a wayto drive the water table down, thereby reducing therisk of soil salinization. Salinity credits are beingdeveloped in Australia as part of a regulatory schemeaimed at reducing soil salinity. Salinity limits areimposed to point source polluters, who can onlyexceed the limits when they offset soil salinity withsalinity credits. Land users who invest in activitiesthat reduce soil and water salinity, e.g., tree planting,are issued salinity credits that they can sell topolluters.

Qi Li Hai Nature Reserve. Coastal swamps surrounded by maizefields. Professional fishing is allowed in these freshwater swamps.Yellow Sea, North of Tianjin, Tianjin Province, China

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are seeking to compete with publicly ownedprotected areas. At the same time, intermediaryorganizations are responding to the demand forsupport in seeking, negotiating, and imple-menting deals.

For the most part, payments are based on site-specific negotiations or reformed entrance fees;little progress has been made in developingsophisticated payment mechanisms such asauctions or clearinghouse mechanisms. Morerecently, the establishment of community-basedecotourism operators and joint ventures hasallowed land stewards to tap tourists’ demanddirectly. Creative marketing by communitygroups, often with the support of internationalNGOs and donors, has begun to create a nichemarket for community-based nature tourism.Rather than selling access to landscape beauty viatour operators, communities are setting up theirown businesses. Examples of such ventures arefound in Belize, Costa Rica, Fiji, Guatemala,Indonesia, Kenya, Mexico, Nepal, Thailand, andUganda. Tour operators that see a future incommunity-based ecotourism are seeking to formjoint ventures with land stewards. This is thecase in Ecuador and Peru. Gradually, the marketfor landscape beauty is evolving from one domi-

nated by government provisions and character-ized by below-cost pricing, to a more competitivesituation involving a wide range of suppliers, thedevelopment of niche products, and increasedconsumer choice. However, as with mainstreamtourism, this market is subject to fluctuations indemand, with preferences of ecotourists oftenbeing more influenced by security considerationsthan by the physical attributes of a destination.


In an example of payments for landscape values, theGovernment of Rwanda was quick to recognize itsmonopolistic position as home to Africa’s lastremaining mountain gorillas and the potential forcharging higher tourism fees. In the 1980s it intro-duced charges of US$250 per tourist for entrance intoits Parc National des Volcans.

Ecuador provides a different example of payments forlandscape beauty. In 1995, one of Ecuador’s first jointecotourism ventures was established between theCofan people and the Transturi Tourist Company in theCuyabeno Wildlife Reserve. The venture, “AguaricoTrekking,” promised to reward the Cofans for theircareful maintenance of the area's famous scenicbeauty, which draws tourists from around the world.

Ditches dug on both sides of a fence in order to keep rhinos away, so that they do not damage the fence. Village area on the outskirts of Royal Chitwan National Park, Nepal.

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Biodiversity conservation

The services provided by biodiversity range fromthe maintenance of ecosystem functions to optionand existence values. However, most of the serv-ices are intangible, which makes them difficult topackage for sale. They are rarely consumed by aclearly identifiable clientele and there arethreshold effects in their supply (e.g., forest areasbelow a certain size will fail to deliver thedemanded biodiversity) making it difficult toportion out the services to individual buyers.

Despite these problems, governments, NGOs,and private companies are paying for forest biodi-versity conservation. The growing public aware-ness of biodiversity benefits and threats of lossare the main drivers. As funds have started toflow toward biodiversity protection, individualcommunity and land stewards have becomeincreasingly proactive sellers of their services.

The growth and diversification in market partici-pation has produced significant innovation in thedesign of commodities and payment mechanisms.Expensive and complex project-based deals aregiving way to intermediary-based transactions(especially trust funds), pooled investment funds,transactions that piggyback on retail sales (e.g.,shade coffee), and even over-the-counter sales ofstandardized products. Each mechanism seeks toreduce market risks, overcome threshold effects,and minimize transaction costs. As risks andcosts come down, market participation is likely tocontinue to rise.

Despite significant progress in recent years,payments for biodiversity services remain nascentfor the most part and to a large degree, experi-mental. Major constraints to market developmentremain, not least of which are the significanttransaction costs associated with the set-up andimplementation of trades. Box 2 outlines severalrecent initiatives of payments for biodiversityservices.


BOX 2. EXAMPLES OF PAYMENTS FOR BIODIVERSITY SERVICES

The Critical Ecosystem Partnership is a trust fundwhich pools finance for biodiversity conservation incritical ecosystems around the world. It was launchedin February 2001 by Conservation International (CI),the World Bank, and GEF. CI recently launched aninitiative to promote biodiversity-friendly cocoa throughthe combination of cocoa with tree planting (shadecocoa) in the Upper Guinean forest in West Africa.Shade cocoa protects biodiversity by maintaining treeecosystems on farms and by preventing the conversionof tropical forests to cocoa plantations. Local benefitsinclude weed control, maintenance of soil fertilitythrough the provision of organic matter, soil erosioncontrol, reduced requirements for chemical fertilizerand pesticides, and additional sources of income andsustenance in the form of timber and non-timber forestproducts (NTFPs). CI is also seeking to tap theorganic products market.

The International Finance Corporation has been theforerunner of multilateral efforts to develop innovativeapproaches to biodiversity venture capital and iscurrently managing two major programs: the Small andMedium- Size Enterprise program and the Terra CapitalFund.

And finally, in 2000, Earthcall TelecommunicationsLtd. put into practice in the United Kingdom its plan tocapture public willingness to pay for biodiversity protec-tion through biodiversity-friendly telephone calls.


Implications of PES and MES for SNRM

PES schemes offer a way of leveraging funds forenvironmental protection. However, documenta-tion of their impacts in practice is lacking so, to alarge extent, their effect on natural resources isyet to be determined.

Pagiola et al. (2002) in a review of 12 case studiesof market-based initiatives for forest conservationadopt two basic criteria to examine their effective-ness in promoting conservation: the extent towhich they attract participants and influence theirbehavior, and the extent and nature of the foreststhat are ultimately conserved. The authorsconclude that most of the 12 initiatives have beensuccessful in attracting participants. They stress,however, that the extent to which a specific mech-anism provides incentives to forest managers toundertake conservation depends not only on theamount and form of payments but also on theopportunity cost of conservation. The cases thathave been most effective are in relatively remoteareas with limited alternative land uses whereopportunity costs are low. In these circumstances,the payments do not have to be very high to bringa clear net benefit for the sellers of environmentalservices. A summary of the potential environ-mental costs and benefits associated with somePES and MES in the four environmental servicespreviously discussed is presented below.

Biodiversity. The impact of shade-grown coffeeinitiatives on biodiversity conservation has beenwell studied and there is evidence of a positiveeffect on species counts for endemic and endan-gered species (Pagiola et al. 2002). There is lessdocumentation of the environmental effects ofother types of payment systems for biodiversity.In some cases it may be possible to identify achange in a proxy indicator such as an increase inthe area designated as protected, as in the case ofthe ICMS Ecológico in Brazil. This says little,however, about changes in biodiversity conserva-tion on the ground. Another constraint is thatnew areas protected under market-based initia-tives may be of insufficient size to ensure long-

term, genetically viable populations of manyspecies. The private protected area scheme inChile is an example (Pagiola et al. 2002).

Apart from biodiversity improvements, four mainenvironmental benefits may also be associatedwith payments for biodiversity conservation—water benefits (water quality maintenance,reduced chemical pollution); soil benefits(reduced soil erosion and maintenance of fertility,moisture, and nutrients); air benefits (controlledair pollution and carbon sequestration); and land-scape beauty. But these potential benefits frombiodiversity conservation have rarely been meas-ured and valued.

Carbon. The potential environmental benefits offorest-based carbon trade include increased biodi-versity; more regular water supplies and higherwater quality (as a result of the positive impacts offorests on local hydrology and the diminishingagricultural area subject to fertilizer and pesticideuse); controlled flooding; and increased scenicbeauty. Possible costs include reduced biodiver-sity where monoculture plantations are used;increased erosion and siltation where plantationsare associated with poor land management androad building; reduced water supplies associatedwith fast-growing trees such as eucalyptus; andincreased greenhouse gas emissions where emit-ters feel that by investing in offsets they gain a“license” to pollute and actually increase carbonemissions. Few studies have measured theseimpacts or highlighted their potentially negativerepercussions. While none of the case studiesreviewed relates to the clearing of natural forestsfor fast-growing plantations, this is a real concernto environmentalists given that the KyotoProtocol acknowledges carbon offsets for planta-tions, but not for forest protection. Despite theseconcerns there is a clear opportunity for carefullydesigned carbon offset projects to promote apackage of forest-centered environmental serv-ices (see the case study of the Noel KempffClimate Action Project in chapter 6).


Watersheds. The effectiveness of markets forwatersheds as a way to protect the environment isstill being assessed. Even though claims aboutenvironmental benefits have been recorded, littledata have been produced to back those claims.Moreover, the benefits claimed tend to be associ-ated with watershed protection itself, not with theintroduction of markets. The main reported bene-fits may be split between watershed benefits andspin-offs. Watershed benefits include improvedwater quality, flood protection, maintained baseflows through groundwater recharge, soil erosioncontrol, and soil fertility maintenance. Positivespin-offs include biodiversity protection, land-scape beauty/aesthetic benefits, and carbonsequestration. Yet the lack of field data on mostof these benefits is disturbing, especially in lightof the scientific uncertainty about forest-waterlinkages.

Landscape beauty. In a number of casesecotourism operations are promoted as mecha-nisms for generating finance for conservation oflocal environments, particularly in areas with highlevels of biodiversity. Biodiversity is thus often

cited as a positive spin-off from the sale of land-scape beauty for ecotourism ((e.g. through huntingbans). Another benefit is improved local waterquality due to reduced erosion and sedimentation.

Implications of PES and MES for povertyreduction

There are many potential advantages of PES.They generate new sources of income for sellers,improve service delivery for buyers, raise the effi-ciency with which resources are being used andallocated, and promote new investments in arange of assets. Yet, the use of PES, and marketcreation in particular, to provide local sustainabledevelopment benefits is contentious. There islittle in-depth research on the impacts of marketincentives on small or marginalized communities,and anecdotal evidence indicates that the impactson the poor can in fact be negative. Research andguidance is therefore needed on how paymentsystems and markets can be created so as tobenefit poor communities.

In theory, the poor may reap many benefitsfollowing the introduction of PES that could helpthem transform natural capital embodied innatural resources into real financial flows. Suchinitiatives are praised for providing local peoplewith increased income while reducing theirvulnerability by diversifying their income (assets)base. For example, in Kerala, India the develop-ment of a local plant-based drug has spurredpayments by pharmaceutical companies to forestcommunities. PES can also provide an effectivemechanism for ensuring a sustained flow of serv-ices to beneficiaries—these services are oftencritical for the livelihoods of poorer groups.Furthermore, PES can have positive conse-quences for welfare because they can stimulatethe development of new skills and the strength-ening of cooperative and hierarchical arrange-ments on which the poor often depend.

However, evidence on the impacts of PES on poorcommunities is scarce and where information


Since 1994 forestland in upland Vietnam (above 600meters) has been regulated by the government’s“People's Forestry” initiative, an example of a nationalprogram of payments for watershed protectionservices. The initiative involves the transfer of forestmanagement from the state to households and individ-uals. Barren forestland is being allocated to house-holds through land tenure certificates and contractsfor protection. Financing for forest protection isprovided through a “National Programme to Create andProtect Watershed Protection and Special Use Forest.”Payments of up to VND 50,000/hectare/year(US$3.34/hectare/year) are channeled to householdsthrough “Forest Protection Units,” which monitor imple-mentation. By the end of 1996, about 6 millionhectares of forestland was allocated for protection(about 5 percent of the country’s total forestland).


does exist it is often biased in the sense that whilebenefits are widely applauded, costs are poorlyrecorded. It is not clear, therefore, how much oreven whether these payment and market schemesfor environmental services can actually contributeto poverty reduction while protecting the environ-ment.

A concern is that MES may actually causedamage to poorer groups whose access tomarkets may be restricted for a variety of reasons.For example, emerging evidence suggests thatpoor smallholders in developing countries faceserious constraints in accessing carbon markets.

By spurring competition, markets may lead tofurther marginalization or exclusion of weakergroups from natural resources on which theyhave traditionally depended. Moreover, becausemarkets introduce a monetary-based system forallocating resources, those with less money havereduced influence over service delivery. Apartfrom the moral issues raised, the inequitabledistribution of benefits can make market expan-sion difficult.

There are several reasons why the developmentof markets for environmental services may notalways benefit the poor:


Tsimihety child carrying forest products to the market. Near Belambo, Madagascar

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• Because poor people often lack propertyrights, they are likely to struggle for a shareof a business, and to fight to retain controlover, and access to, the resource on whichthey depend.

• Poor individuals lack the requisite skills andknowledge for participating in emergingmarkets, such as managerial skills for organ-izing supply, negotiating and contractingskills for structuring deals, scientific under-standing of environmental services, and tech-nical skills to deliver services.

• Inadequate finance. Participation inemerging markets requires up-front invest-

ment. With respect to supply, serviceproviders will need to invest in searching forclients, acquiring skills, bringing the serviceto market, insurance, etc. On the demandside, buyers need financing to conclude a dealbut poor groups tend to lack access to afford-able finance.

• Poor market information and contacts.

• Insufficient communications infrastructure.Transportation and communication infra-structures are important in bringing partiestogether.

• Inappropriate commodity design. In generalthe provision of environmental services is along-term commitment (e.g., carbon dealstend to span decades rather than months oryears). However, poor communities rely onlivelihood strategies that are flexible and ableto cope with unexpected shocks. Thus, evenwhere new markets offer opportunities forincreasing income, if they require extendedcommitments, they are unlikely to attractparticipation of vulnerable groups. Wherepoor people accept long-term contracts, thereare serious risks that these contracts willdecrease their ability to respond to shocksand would damage their welfare.

• High coordination costs: Transaction costsassociated with establishing and runningmarket mechanisms are high (seeking, nego-tiating, agreeing, implementing, monitoring,and certifying deals). These transaction costswill be higher the greater the number ofbuyers and sellers involved (as in the case ofa watershed where a number of individualslive). Poor households with small plots willtend to face high coordination costs as part ofany deal.

• Minimal power. Where poor groups havelittle voice in the development of markets,there is a real risk that they might be margin-alized from market benefits. Even when poorcommunities can participate in markets, they


Based on the Kyoto Protocol’s targets, Bosello andRoson (1999) use an integrated assessment model toanalyze the impact of global trading of carbon seques-tration on the per capita income of Annex B countries(the rich ones) and non–Annex B countries (developingcountries). While all countries show a positive welfaregain from global trading, the gain is spread dispropor-tionately—with Annex B countries gaining far morethan developing countries. When banking (the right toaccumulate carbon credits and gain future credits onthem) is incorporated into the analysis, incomes fornon–Annex B and former USSR countries are actuallynegative in early years, turning positive only around2040.

Norwatch, a Norwegian NGO, undertook an assess-ment of a forest carbon offsets scheme in Uganda bythe company Tree Farms AS (2000). The review high-lighted a number of social concerns including (i) threat-ened eviction of about 8,000 people who depended onthe area for farming, collection of non-timber forestproducts, cattle grazing, and fishing; (ii) poor laborrelations even though only 43 people were employedby the company; and (iii) potential impacts on localwater supplies as fast-growing plantations absorbincreasing amounts of groundwater.

From F. Bosello and R. Roson, 1999, “Carbon Emission Trading andEquity in International Agreements.” FEEM working paper 57.99,Fondazione Eni Enrico Matteri, Milan, Italy.


tend to be the weakest party. Where powerbalances are unequal, achieving a levelplaying field is very difficult.

These constraints are also mutually reinforcing.Poor market information and lack of contacts, forinstance, raise the transaction costs facingmarginalized groups.

From a buyer’s perspective, a further concern isthat poor groups will be harmed by new demandsfor payments for services that they have previ-ously received for free. While in the long term

markets are being put in place to benefit all thosewho depend on continued supply of services,there may be short-term trade-offs. Furthermore,the distribution of benefits may not reflect thedistribution of payment obligations. Wherepoorer groups are asked to pay for environmentalservices but lack the assets to benefit fromimproved environmental conditions, there may beserious negative equity impacts. For example, if acommunity negotiates payments for watershedprotection to improve the quality and depend-ability of water supplies, landless households arelikely to benefit least since they do not use waterto the same extent as local farmers.

Actions to ensure that MES are pro-poor

While the hurdles facing poor people’s participa-tion in emerging markets for environmental serv-ices are high, they are not insurmountable.Seven possible steps for promoting pro-poormarkets are identified below:

• Secure resource tenure. Formalization ofnatural resource rights is essential to givemarginalized groups control over, and rightsto returns from environmental services.There are already signs that market develop-ment has spurred forest land tenure formal-ization in some disadvantaged communities inBolivia, Costa Rica, Peru, Ecuador, and India.

• Define appropriate commodities. Simple andflexible commodities that can be self-enforced, that fit with existing legislation, andthat suit local livelihood strategies need to bedeveloped in poorer areas.

• Devise cost-effective payment mechanisms.In areas where regulatory capacity is weak,trading skills are in short supply, and marketinfrastructure (e.g., communications, informa-tion systems, transport, monitoring) is under-developed, simpler payment mechanisms arelikely to be more effective. Innovative tech-niques to lower transaction costs such assystems for pooling demand and supply andintermediary-based transactions should beactively encouraged.

• Support cooperative institutions of serviceproviders to increase bargaining power.While landowners with small plots areunlikely to find a market for their carbonoffsets, biodiversity conservation, watershedprotection, or landscape beauty, a group oflandowners may attract investment.Cooperation is critical in allowing poorlandowners and service beneficiaries to sharethe costs associated with market participa-tion. It is also essential for achieving aminimum level of supply and demand,thereby permitting market participation.


In an example of the high transaction costs that thepoor may face when trying to compete in MES, Chopraet al.’s (1990) evaluation of Sukhomajri’s watershedprotection project in India incorporates transactioncosts into the cost-benefit analysis. Transaction costswere those associated with establishing a functioningcooperative network and included the training ofvillages in soil and water conservation techniques andorganizational leadership, and the cost of “motiva-tional inputs.” The benefit-cost ratio fell from 1.33 to0.73 when transaction costs were included. If thelocal communities were to pay those costs theirbenefits would be negative.

From K. Chopra, G. Kadekodi, and M. N. Murty, 1990, ParticipatoryDevelopment, People and Common Property Resources. New Delhi:Sage Publications.

• Invest in training and education. Training inmarketing, negotiation, management, finan-cial accounting, contract formulation, andconflict resolution are important prerequisitesfor effective participation. Technical skillsrelating to forest management for environ-mental services are also needed.

• Establish a market support center. Toimprove poor people’s ability to participate inemerging markets, a central support centercould offer free access to market information,and an advice bureau could support thedesign and implementation of contracts.

• Provide start-up finance to ensure participa-tion of poorer groups. Where finance isneeded to negotiate and conclude environ-mental service deals, the government mayhave a role to play in providing start-up funds.

The sustainability of PES and MES asfinancing mechanisms

The sustainability of PES and particularly MES asfinancing mechanisms is hard to assess empiri-cally given that most initiatives are relatively new.Pagiola et al. (2002) identify three crucial factorsfor sustainability:

• Continued demand for the services beingsold;

• Continued ability of suppliers to provide theservices; and

• Maintenance of the necessary institutionalstructure.

Demand for environmental services is partlyexogenous, depending on such factors as popula-tion, economic growth, and competition from low-cost alternative technologies. All of these factorscan result in changes in demand. For some serv-ices such as drinking water, it is likely thatdemand will continue to grow. Demand for otherservices such as biodiversity is perhaps lesscertain. For example, as Pagiola et al. ask:

Will consumers be willing to pay a premium forbiodiversity-friendly coffee in a recession?

Ability to supply the service depends on the relia-bility of the scientific links made between activi-ties carried out and services provided, as well asthe nature of the economic incentives created.The risk of poor scientific evidence is perhapsgreatest in the watershed service market wherethe forest-hydrology links are not certain. This inturn could affect demand; if expected services arenot delivered, payments will be abandoned. Evenwhere the linkages are clear, it is possible that thepayment made is insufficient to compensate forthe opportunity costs involved. As this becomesclear to the suppliers of services, they may loseinterest. This is more likely to happen where thepayment level is determined administratively oras a result of political negotiation, rather than onthe basis of cost-benefit analysis.

The sustainability of the institutional frameworkin which markets evolve is important but it shouldbe noted that this framework rarely remainsstatic. There is a constant process of change andadaptation of institutions—be they market, regula-tory, or cooperative—in response to changingpreferences and power balances. Where marketmechanisms gain support from more powerfulgroups and generate greater payments, it is likelythat they will be associated with increased invest-ment in supporting institutions and that they willbecome more sophisticated. Efforts to promotepayment for environmental services should,therefore, seek to capitalize on a range of stake-holders’ interests and avoid alienating particulargroups that may block market development. Theimpacts on poor households, for example, are ofparticular interest, not just for equity reasons, butfor ensuring that markets are sustainable.Monitoring (both to document service delivery tobuyers and in order to improve the operatingprocedures), independent verification, and invest-ment in supporting institutions are all actions thatcan be undertaken to enhance sustainability.



When should a project developer choose aMES approach?

What are the choices that an SNRM practitionerfaces in deciding whether an MES is a good orfeasible approach to the financing of a particularnatural resource management project? Underwhat circumstances could a market-basedapproach be a good option? Some key questionsthat a practitioner should consider are set outbelow.

• Is there a clear demand for an environmentalservice associated with the project? Manyanalysts believe that demand-driven initiativeshave the greatest chance of success.Practitioners that begin on the supply siderun the risk of developing mechanisms thatsupply the wrong services in the wrong place,or at prices that buyers are unwilling to pay.

• Can a clear link be established between theactivities of the project and the provision ofenvironmental services demanded? Buyers ofenvironmental services need to have evidencethat they are getting what they are paying for,otherwise their willingness to pay may be asbest temporary.

• Does the community have formalized rightsto the resource and to the environmentalservices associated with it? If rights to theresource are unclear or informal, it may bedifficult to negotiate deals with prospectivebuyers as they want to be sure of delivery.The creation of an MES may also have unin-tended effects of stimulating others' interestin the resource, leading to expropriation andfurther marginalization of the community.

• Do strong cooperative institutions exist?Many market-based initiatives requirepooling of supplies in order to reduce trans-action costs, and in the case of watershedservices and biodiversity conservation, toprovide a minimum threshold of environ-mental services.

• Would a market-based initiative be compatiblewith the existing legislative framework? Anumber of initiatives have required legislativechange in order to be feasible. This goesfurther than formalizing property rightsparticularly where governments are involvedas sellers or buyers of services. In CostaRica, water companies needed regulatoryapproval in order to charge additional fees towater users to cover environmental services.


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• Are supporting institutions (intermediariesand ancillary service providers) in place?Most market-based initiatives require theinvolvement of a number of organizations toprovide different support activities: to bringsuppliers into contact with buyers, to facili-tate negotiations, and to certify servicedelivery. Establishing a new initiative will bemuch easier where such organizations arealready in existence locally and able toextend their support.

If the answers to the questions above are all nega-tive, it may be more fruitful to concentrate onchanging these contextual conditions first, eitherdirectly or through lobbying governments (seebox 3). If there is little potential for changingthese conditions, alternative approaches forfinancing the project need to be pursued.


Governments clearly have a role to play in fostering themarket’s development and in shaping markets in order tomaximize welfare by establishing appropriate policies andregulations. There are a number of ways by which policy-makers might jumpstart market development such as:

• Raising awareness. Suppliers need to learn aboutthe value of their service and buyers' potential will-ingness to pay for its delivery, while beneficiariesneed to learn about the value of the service andthreats to its continued provision. General environ-mental education can help to stimulate publicdemand for action.

• Reducing transaction costs and trading risks.Governments play an important role in providing anenabling environment for market development.Investment in market infrastructure, efficientcommunication systems, research on servicedelivery and measurement, and training and invest-ment in supporting regulations and standards allcontribute to lowering transaction costs and risks forpotential market participants.

• Providing secure property rights. Tenure securityis essential for the implementation of MES and for

market creation. Without clear and defendablerights to land, forest, or the environmental serviceitself, suppliers cannot make a credible commitmentto supply an environmental service. Actions thatcan improve secure tenure include formalization andregistration of rights, maintenance of a central publicregistry, coordination of government departmentsinvolved in allocating rights, and the strengthening ofthe dispute resolution mechanism. Monitoring andenforcement systems will also need to be improvedin order to ensure that rights can be defended wherechallenged.

• Introducing stricter environmental standards.Stricter environmental standards, where effectivelyenforced, often stimulate the establishment of MES.

Notwithstanding the importance of broad participation,policymakers may catalyze market development bytargeting individuals or groups early in the process. Ingeneral, market development will move forward mostquickly where powerful stakeholders are supportive;however, the distributional impacts of various courses ofaction need to be considered to avoid the marginalizationof weaker groups.

BOX 3. THE ROLE OF GOVERNMENT IN DEVELOPING MES


The term “partnership” is widely used and vari-ously defined. To some it is a legally basedcontractual agreement, while to others it is anyform of dialogue between two parties. Some usethe term in a normative sense, implying that foran arrangement to qualify as a partnership itneeds to have certain characteristics (e.g. beequitable to all parties). In this chapter we usethe term private sector–community partnership ina purely descriptive sense to refer to a wide rangeof deals, contracts, and informal arrangementsthat are entered into by companies, be those largetransnationals or small family-run enterprises, andcommunities in the expectation of benefit.Partnerships between the private sector and localcommunities are a growing phenomenon in anumber of natural resource sectors worldwide,particularly in tourism and forestry.

Tourism is one of the world’s largest industriesand nature-based tourism and tourism in devel-oping countries are among its fastest-growingsectors. To date, most benefits from tourism havegone to commercial operators in the tourist-origi-nating countries or in metropolitan centers of thehost country. Tourism has therefore contributedmuch less than might have been expected tosocial and economic development in rural destina-tions. Private sector–community tourism partner-ships offer potential for rectifying this. In anumber of developing countries, tourism partner-ships between the private sector and localcommunities are becoming more common, espe-cially as communities are increasingly gainingrights to wildlife and other valuable tourismassets on their land, through national policychanges on land tenure. Partnerships are devel-oping even in cases where the tourist operatorsare the landowners. This happens because opera-tors increasingly recognize not only that localsupport is essential for the long-term maintenance

of tourism assets on which the industry depends,but also that many communities have culturalresources that can greatly enhance or diversifythe existing tourism product.

In the forest sector, a wide range of deals havebeen made over the years between forestrycompanies and local communities. Companieshave sought access to land, labor, and continuoussupplies of wood while communities have soughtemployment, technology, infrastructure, socialservices, sources of income, and secure access toa wide range of forest products. What has beenless common is the incorporation of sustainableforest management and social responsibilityconsiderations in such relationships, although thisis an emerging trend.

With defensible property rights and a policyframework that allows flexible development ofpartnerships, companies and communities cancollaborate for direct mutual gains (both financialand nonfinancial) plus broader benefits to the envi-ronment and society. Well-structured partnershipscan, therefore, represent a means of achievingsustainable natural resource management.

Partnerships as a financing mechanism for SNRM

Not all partnerships between communities andthe private sector relate to natural resourcemanagement. They may be purely focused onproduction or may involve a companycontributing to local development in return forcommunity goodwill or a “social license tooperate.” For a partnership to be considered afinancing mechanism for natural resourcemanagement it should involve a private companyentering into an agreement with a community bywhich the latter will be provided with certainfinancial and nonfinancial benefits in return forthe former's access to natural resources held bythe community and/or conservation resourcemanagement activities and avoidance of activities


CHAPTER 3. A CLOSER LOOK AT PRIVATE SECTOR–COMMUNITY PARTNERSHIPSby Maryanne Grieg-Gran and Camille Bann / IIED17

17. This chapter draws heavily on recent IIED research on this issue, particularlyMayers and Vermuelen (2002) and Roe et al. (2001).

damaging to the resource. Thus, a company mayeffectively be paying a community for resourcemanagement activities, providing indirect incen-tives for such activities, or in some cases bringingthe community into contact with buyers of envi-ronmental services.

There is some overlap between the concepts of“partnerships” and “payments for environmentalservices” in that partnerships can be consideredas one type of PES where the payment mecha-nism involves direct negotiation between theparties. But this is just one of a number of issuesin a partnership. Other important aspects of apartnership include the way partnership opportu-nities are identified; the way partners areselected; the negotiation of the terms of the part-nership, covering both inputs from and benefits toeach party, risk-sharing, and duration; and theprocedures in place for monitoring and review.This chapter gives particular emphasis to theseaspects of a partnership.

What motivates companies and communitiesto form partnerships?

A range of factors may determine whether compa-nies and communities are motivated to form part-nerships together or actively avoid them.Reasons why companies may aim for partnershipswith communities include the following:

• Public and political pressure. Intolerance ofirresponsible corporate behavior anddemands to demonstrate social responsibilityare growing in many countries. This hasdriven a number of forest and tourism compa-nies to adopt corporate social responsibilitypolicies. For example, tourism companies inNamibia have found that a visible commit-ment to working with local communities isstrategically important, particularly in a post-independence political climate. In SouthAfrica, the outgrower schemes operated bythe country’s largest forestry companies,Sappi and Mondi, provide these companies

with a progressive image at a time when thedistribution of land rights is being called intoquestion.

• Market advantages. The growing strength ofthe “fair trade movement” and ethicalconsumerism mean that increasingly,consumers want to be assured that the prod-ucts they buy benefit local communities andare not damaging to the environment. Fortourism companies partnerships with commu-nities offer the potential to utilize communalresources and create unique selling pointsthat are able to attract new customers. This isimportant as market trends in tourism aredemanding increasingly sophisticated andvaried products. Entering into an agreementwith a local community is a way of ensuringexclusive access to a particular area and,hence, enhancing the quality of the product.

• Land and resource access advantages. Forforestry companies there may be accessrestrictions to wood sources and land. Theserestrictions may be avoided, and resourcesecurity and diversity of sources of supplyincreased through partnerships with localland and resource owners. Similarly, astourism grows it is necessary for private oper-ators to seek new opportunities in newareas—notably on land controlled by localcommunities.

• Local risks that the community can help mini-mize. Local risks include tenurial and land-useconflicts, the destruction of company property,violence against company employees, andinterference from local politicians. These risksare important in forestry. Similarly, ensuringthat local people benefit from tourism is a wayof reducing hostility to tourists and henceincreasing the security of the enterprise aswell. By providing an incentive to manage theresource base upon which the tourismproduct depends, the partnership reduces therisk of environmentally damaging activities.



As with the private sector, communities may havea variety of short-term and long-term motivationsfor entering into partnerships, including thefollowing:

• Visible benefits. Other individuals or communi-ties have already been seen to benefit fromsuch relationships. This applies especially totourism.

• Secure land tenure and resource rights. Thereis a potential for “cashing in” on newlyacquired rights to land and wildlife resourcesrather than just using them for subsistencepurposes. This was a major factor in Namibia(see box 4). Moreover, partnerships canrepresent an easy form of benefits as theymay require only passive involvement, suchas authorizing a private company to conductan activity on communal lands.

• Access to private operator skills, technology,capital markets, and assets. For example,forest companies may bring to the partner-ship new technologies, services or scientificknowledge on the characteristics of alterna-tive tree species, or access to internationalmarkets.


BOX 4. DRIVERS OF TOURISMPARTNERSHIPS IN NAMIBIA

A major driving force for the development of tourismpartnerships in Namibia has been the recently intro-duced communal conservancies legislation which giveslocal people user rights to wildlife and tourism oncommunal land.* As rights to land and wildliferesources are increasingly being devolved at the locallevel, the private sector is recognizing the need to workwith local people and to acknowledge their central rolein maintaining cultural and natural heritage assets thatattract tourists. Previously, private operators couldnegotiate with government ministries for access totourism resources on state or communal land. Theynow find themselves in the position of having to dealdirectly with communities. The communal conservan-cies legislation, coupled with a national program oncommunity-based natural resource management,provides a framework through which both biodiversityconservation and rural development goals can beachieved by enabling communities to benefit fromcommercial ventures on their land. Giving communi-ties power to negotiate with the private sector, throughthe devolution of rights to tourism assets and adviceon how to use that power, is a mechanism for ensuringthat they receive a more equitable deal for the use oftheir natural resources.

For this reason tourism partnerships are being encour-aged by agencies and NGOs through the nationalcommunity-based natural resource management(CBNRM) program as a way of accessing private sectorfinancing for rural development, which can make thenew conservancies more financially viable and self-sustaining. Government agencies, principally theDirectorate of Environmental Affairs (DEA), and devel-opment and conservation NGOs are promoting moreformal partnerships by acting as facilitators oradvisors to communities.

(*) In 1992, the then-Ministry of Wildlife, Conservation and Tourism(MWLCT) approved a policy document that made provision for theestablishment of wildlife management units called conservancies.Conservancies were defined as: “...a group of farms and/or area ofcommunal land on which neighboring landowners/members havepooled their resources for the purpose of conserving and utilizingwildlife on their combined properties and/or area of communal land” Woman retuning from the field with animal fodder. Annapurna

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Types of partnerships

Company-community forestry partnerships covera range of partners (from large-scale corporationsto small-scale private enterprises on the privatesector side; and farmers, individual local actors,community-level units of social organizations suchas farmers’ groups, product user groups, andcooperatives on the community side); forest types(dense forest, open woodland, agroforestry, small-holder woodlots, and commercial scale planta-tions); and relationships. The types of communityforestry deals, categorized by forest product, aresummarized in table 2.

Similarly to the forestry sector, a variety of privatesector–community partnerships can be found inecotourism or wildlife, ranging from the veryformal and contractual to the informal. Someinvolve ecotourism, others hunting, while stillothers focus on complementary activities such ascultural villages and craft production. These canbe found on communal, private, or state land. Foreach type of partnership there are a variety ofdifferent types of inputs to be made (includingcapital investment, land, labor, time) and benefitsto be received (e.g., exclusive rights, equityshares, employment, training). Box 5 presents aprofile of private sector–community partnershipsin Namibia to illustrate the types of tourism part-nerships that are emerging in that specificcontext.

Implications for SNRM

Research on the impact of private sector–commu-nity partnerships has focused on equity aspectsand the costs and benefits to communities. Thereis relatively little evidence on whether partner-ships improve natural resource management inthe long-term. Impacts seem to be very case-specific.

In the forestry sector partnerships have beenshown, in some cases, to provide incentives fornatural resource management—for examplethrough the promotion of sustainable multipur-

pose forest management or the reclamation ofdegraded land, which is considered a majorbenefit of the Xylo Inda Pratam (Faber Castell)outgrower scheme in Indonesia; and the XIP farmforestry schemes in India. They have also beenassociated with micro-scale improvements inerosion and climate where trees are intercroppedor planted on boundaries—for example, in India.However, negative environmental effects arepossible where plantations are badly managed orpromote the spread of alien species such aswattle, which has been a problem in some of theSouth African outgrower schemes. Partnershipshave also been considered to provide new oppor-tunities for large-scale logging in natural forestsor to provide incentives for clearing naturalforests for monoculture. This is a major concernin Papua New Guinea where arrangements tofacilitate the leasing of communal land to privatecompanies are encouraging the conversion offorest to oil palm plantations.

In the tourism sector, it is often assumed that theinvolvement of communities in tourism and thebenefits they receive from the partnership willprovide incentives for management of the naturalresource base. But in some cases, the linkbetween the benefits from the partnership andthe desired behavior is not all that transparent.This applies particularly to partnerships wherethe community input is against certain land uses.In practice, it is the combination of partnershipswith other factors such as regulations on naturalresource management that has the greatestimpact. In Namibia, the underlying regulatoryframework confers rights and responsibilities fornatural resource management to communities.This is not just a case of avoiding certain land useactivities, which is a cost in itself; it also requiresexpenditure by communities on fencing, waterholes, game guards, vehicles, and an office. Thefinancial benefits from partnerships with privatecompanies provide a means to cover these costsand in some cases generate a surplus. The keyissues are whether such partnerships can


Industrial pulpwood Outgrower schemes—industry assists farmers in establishing and managing pulpwood planting, using guar-anteed supply contracts.

Farm forestry support—farmers establish plantings with technical support from industry, and sell outputwith purchase contracts.

Farm forestry crop share—plantings established on farmers’ land with support from industry, and cropprofits shared.

Joint ventures—communities and companies share equity in pulpwood production venture.

Land leased from farmers/communities—forest owners lease to private companies for pulpwoodproduction.

Corporate social responsibility project—company contributes to local development.

Outgrower scheme/farm forestry support—schemes that directly link producers with commodity whole-salers or final users.

Contracts from communities—contracts or agreements for wood-using or logging companies to harvestwood from community forests.

TABLE 2. THE TYPOLOGY OF COMPANY-COMMUNITY FORESTRY PARTNERSHIPS (BY MAIN FOREST PRODUCTS)

Product Type of partnership

High-quality timber Joint venture—forest communities manage timber in partnership with private company.

Concessions leased from communities—forest communities lease concessions to private industry,communities retain substantial control.

Outgrower schemes—small farms or communities participate in outgrower or crop share schemes withprivate companies planting improved high-value timber.

Corporate social responsibility project—company contributes to local development in return for “sociallicense to operate.”

Commodity wood

Group/community certification with company support—forest communities or farm producer organiza-tions with contacts or agreements with certified wood buyers or intermediaries to market products.

Certified wood

Co-management for non-timber forest products (NTFPs)—communities manage/benefit from NTFPs incompany-controlled areas producing wood or pulp.

Outgrower schemes—small-scale farmers grow and sell NTFPs through outgrower schemes with privateindustry.

Non-timber forestproducts

Community processing or farmer out-processing—community or farmer cooperative sawmill, supplyingmarkets in which large-scale, high efficiency mills do not compete.

Forest productprocessing

Forest environmental services agreements—payments and other benefits to communities or farmergroups from municipalities or conservation agencies, to provide forest environmental services such asbiodiversity conservation, watershed protection, carbon storage, and landscape amenity.

Environmentalservices



continue to generate sufficient returns to makeresource management worthwhile in the longerterm and whether the market is large enough tosupport more than a few conservancies.

Some tourism partnerships have specifically builtin resource management concerns. For instance,Lianshulu Lodge in Mudumu National Park innorthern Namibia agreed to compensate neigh-boring communities for any cattle killed by lions.It also provided cattle for community feasts in lieu

of them hunting buffalo, a decision that wouldhelp the growth of the wild buffalo population.Another company, Skeleton Coast Fly Safaris indi-cated that it would negotiate a revenue-sharingagreement with the Marienfluss Conservancy ifcertain conservation goals were met. Forinstance, local people would be asked not to growvegetables on the pristine banks of the river as itinterferes with tourism activities.

Social impact of partnerships

Partnerships can yield a wide range of financialand nonfinancial benefits for communities.However, the experience so far has been mixed,and for every positive outcome noted there arecaveats as to its general applicability and theactual level of achievement. These are summa-rized below.

• Financial benefits: Hard evidence fromseveral countries indicates that for manysmall-scale farmers growing trees under part-nership is more profitable in the short termthan alternative crops (e.g., outgrowing euca-lyptus and bamboo is a more profitable optionin Thailand than competing cash crops).18 Intourism there are cases where communitieshave received appreciable amounts from landrental and other revenue-sharing arrange-ments. The Torra Conservancy in Namibiahas a partnership arrangement withWilderness Safaris for Damaraland Camp, aluxury tented camp. The revenue receivedby the community from bednight leviesagreed under this partnership amounted in1998/99 to the equivalent of three months'wages per community member from casualagricultural labor. But for most communities,partnership activities, whether in forestry orin tourism, are supplementary rather thancentral to livelihoods. In South Africa, forinstance, it is clear that company-community


18. On the other hand, it is difficult to forecast the long-term economic prospects ofwood-related products versus agricultural crops.

BOX 5. A PROFILE OF PRIVATESECTOR–COMMUNITY PARTNERSHIPS IN NAMIBIA

Who is involved?

• Increasingly conservancies, but also traditional authorities andindividual community members

• Large international companies and individual owners of lodges

Inputs from both sides

• Community input: access to land, wildlife, or cultural attractionsand tourism rights (some of these may be intangible inputs thatare difficult to value)

• Private sector input: land rent, payment of bed-night levies,payment for hunting quotas, employment, training

Who owns the partnership enterprise?

• Primarily privately owned; a few are community owned and noneare jointly owned

• Community-owned ventures tend to be complementary activities(e.g., traditional villages, craft production).

Who initiates the process?

• A majority initiated by the private sector partner but conservan-cies are beginning to take the initiative

Formal or informal?

• A majority of partnerships are formal

How are partners selected?

• Primarily through one-to-one negotiation

• Tendering only for hunting so far


outgrower schemes are not enough, on theirown, to lift households out of poverty. Themain positive impact of these partnerships istheir contribution to livelihood diversification.

• Employment and training: Partnerships havebeen appreciated by communities because oftheir potential to create jobs for local people.For the Torra Conservancy, employment ofcommunity members at the DamaralandCamp is considered a significant benefit asthe pay is relatively good and reliable. Sometraining has also been provided. But thenumbers employed under tourism partner-ships are generally small and the work ismainly unskilled. In the forestry sector, whilepartnerships can provide some guaranteedemployment, there is little evidence that theyhave delivered better working conditions toforestry employees.

• Capacity building and strengthening of localinstitutions: Some partnerships have resultedin greater cohesion and organization among

community groups. In the forestry sector,however, there is little evidence at this pointof a substantial increase in the bargainingpower of communities.

Partnerships have at times also raised socialconcerns. Such concerns, in the case of forestrysector partnerships include the following:

• Low-wage labor and inequitable land distribu-tion have been perpetuated in deals thatentrench existing patterns of ownership andcontrol.

• Disadvantaged community members havebeen excluded from some schemes thatrequire possession of land and some initialcapital resources. The eucalyptus-growingschemes promoted by the company ITC BPLin Andra Pradesh, India, for example, havenot attracted the participation of smallfarmers as they cannot meet the initial andrecurring costs of tree plantations.


Women plant rice on slopes that have been cleared and burned (tavy method). Near Belambo, Madagascar

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• Few partnerships have given the communitya share in the ownership, and by implication,the management and control of the partner-ship enterprise. However, the risks involvedin such arrangements are considerable andno particular ownership structure is neces-sarily better than another. Much depends onthe priorities and capacity of the communityand the level of risk it is comfortable with.

Sustainability of partnerships as a financing mechanism

The sustainability of partnerships as a financingmechanism is primarily a function of their successin meeting expectations and generating net bene-fits on both sides. Some deals collapse because ofmisunderstandings between parties, resulting inheavy losses and recrimination and even violenceas was the case with the Boise Cascade forestryjoint venture in Mexico. When partnerships last,this is usually a reflection of mutual benefits thatkeep the company interested in providing or facili-tating the financing, and the community's interestin managing the resource. Table 3 has someexamples of these mutual benefits in the contextof forestry.

Factors external to the partnership can also playan important role, most notably in affectingdemand for the product around which the part-nership revolves. This was the case of the Picopoutgrower scheme in the Philippines, whichcollapsed after 30 years as other sources of pulpbecame much cheaper. In Namibia political andsecurity hardships have severely disrupted theprogress of tourism partnerships. For example,secessionist disturbances in the Caprivi Region ofNamibia since 2000 forced the government to calla state of emergency in the area, and tourism hassince come to a complete halt. Land disputes havealso affected developments in some areas.

The support given to the community is alsoimportant. If communities are to be able to nego-tiate as equal partners they will need a consider-able amount of support in the preparation of thepartnership. In Namibia, the support given byNGOs such as the Integrated Rural Developmentand Nature Conservation (IRDNC) and the LegalAssistance Centre to communities in the facilita-tion of negotiations, the drawing up of contracts,etc. has been crucial. Government agencies havealso provided support. Once a partnership is inoperation a community will still need some level


TABLE 3. MUTUAL BENEFITS FROM FORESTRY PARTNERSHIPS

Case Community benefits Company benefits

Sappi and Mondi (South Africa):outgrower schemes

Cash returns compare well withalternative land uses

Supply of 10 percent raw materials criticalto economies of scale in processing

Wimco and JK Corp (India): farm forestry support

Evolution of competitive farm forestry Sustained raw material supply

PT Perhutani (Indonesia): tenant agroforestry scheme

Easing of land shortage Cheap labor supply, less conflict

Babine (Canada): joint venture Expanding joint venture share Development into industry leader


of support, for example, in reviewing the partner-ship agreement or in dealing with disputes. Suchsupport can be costly, therefore government oraid funds are often necessary to enable partner-ships to happen and can be crucial in how theyimpact communities. This lessens the self-suffi-ciency of partnerships. While they offer a way oftapping into private sector resources to meet envi-ronmental and community development goals,other sources of funds are still required.

Another issue is that the company involvement inpartnerships with communities may be partiallymotivated by the availability of government finan-cial incentives. In Indonesia, for example, thegovernment has a policy of promoting partner-ships between companies and smallholders orcommunities with support from a ReforestationFund. Thus, only some of the financing providedby a company is additional. This is not an issuewhere government incentives play a catalytic rolein getting partnerships started. But problemsmay arise where the partnership is so dependenton these incentives that their withdrawal resultsin the termination of the collaboration betweencompany and community. The implication is thatpartnerships will not replace government ordonor financing; at best they will reduce theamount required.

Actions to encourage successfulpartnerships

Criteria for success inevitably entails some subjec-tivity. Mayers and Vermeulen (2002) define aperfect deal as one that is equitable, efficient, andsustainable and that has been returning benefitsto company, community, and forest on a long-termbasis. Roe et al. (2001) place the emphasis onmanaging and meeting expectations so that bothsides are satisfied with the outcome. Their studydefines a successful partnership as one that meetsexpectations on both sides with regard to thefollowing: duration, extent of financial and nonfi-nancial benefits generated by the partnership,division between the partners of financial and

nonfinancial costs and benefits, and divisionbetween the partners of responsibility for runningthe partnership enterprise.

A number of actions can be undertaken atdifferent stages of the partnership process inorder to promote a successful outcome. Theseinclude assistance to communities—e.g., adviceon evaluating their resources and the offers madeby private companies, legal advice for contractscrutiny, capacity building, “matchmaking” serv-ices to link potential partners, and provision offacilitation services for negotiations. Thirdparties such as governments, NGOs, banks, anddonors may have important roles to play in theseactions.

Community preparation in establishing prioritiesand analyzing the full range of land use options(both the land use around which the proposedpartnership revolves and alternatives) is essentialas a precursor to negotiation. Expert advice maybe necessary for analyzing potential returns fromdifferent land uses, particularly where an activitythat is new to the community, such as tourism, isinvolved. Because the value of tourism assets andhence the potential returns varies according tothe characteristics of the resource, communitieswill need assistance from tourism specialists tounderstand the value of their tourism assets.Where communities have no previous experienceof an activity outside facilitators can ensure thatfalse expectations are not raised and that businessplans are realistic. Forestry partnerships facesimilar challenges, exacerbated by the fact thatthey are necessarily long-term arrangementsgiven the slow-growing cycle of trees. Long-termforestry arrangements present big challenges toboth sides, but particularly to the community,which may have to deal with such alien issues asforecasts of forest growth rates and productivity,national policies, market opportunities andprices—and understand how these will affectreturns.

Most partnerships involve direct negotiation andthe process is usually initiated by the company. In


some cases it may be possible for the communityto invite proposals from more than one companythrough an auction or tendering process in orderto encourage competition and increase its accessto information. Some communities in Namibiasuch as the Khoadi-Hoas Conservancy have bene-fited from adopting a tendering process for theirwildlife hunting quotas in that this allows thecommunity to choose from a number of bidders.

Some steps in negotiating the terms of a partnership

Ownership of the partnership enterprise:Enterprises based on partnerships might bewholly owned by the private sector or the commu-nity, or jointly owned. There are advantages anddisadvantages to each ownership structure andthe “best” option will largely depend on thenature of the enterprise and the priorities andcapacities of both sides. Formal ownership mayalso not be the issue for some communities butrather aspects such as management and control,which are closely linked with it. The communityneeds to be clear on what it wants in relation tomanagement involvement, income, and risk. Thebest approach is to build-in some flexibility toallow change. If the community does opt forpartial or full ownership at some stage it may beimportant to include in the partnership explicitprovisions for training in management and otherskills to increase the chances that the ownershipwill translate into involvement in running theenterprise, rather than simply taking on morerisk.

Payment structure: The choice of payment struc-ture and the degree to which it is linked to thesuccess of the enterprise through revenue orprofit-sharing depends on the level of risk thecommunity is willing to take on. A minimumpayment should also be incorporated to ensurethat the community receives something in theevent the operator does not start the activity oroperates at a very low level. It is advisable that

partnerships allow for changes in the paymentstructure after a specified period.

Determining how much the overall package shouldbe: The community needs to weigh all of the costsinvolved in resource management, including theopportunity cost of forgone land uses, and in thecase of wildlife-related tourism projects, the costsof the increased risk of damage to crops and live-stock from wildlife. If the agreement involvesrestrictions on other development within a certainradius the community should be compensated forthis.

Employment and training: If the community iskeen on its members taking on higher-levelemployment in the partnership enterprise, real-istic targets for this should be incorporated in theagreement regarding:

• Recruitment: Community institutions shouldbe involved in recruitment.

• Determining a fair wage: The communitymembers should expect to receive at least asmuch as they do from their traditional activi-ties. Wages or salaries paid by other enter-prises engaged in the same activity are auseful benchmark but differences in skillsand education level need to be taken intoaccount.

Formalizing the partnership: All partnershipsshould be based on a written agreement withclearly defined rights and responsibilities on bothsides. It should be legally binding but not overlycomplicated. It should include resource manage-ment practices that are expected from each side.At the operational level it can be useful to have,in addition, a joint work plan with a clearschedule of activities within an overall manage-ment framework.

Contract length: It is suggested that contracts belong enough to provide security on investments,10–15 years in the case of tourism, but not so longas to lock either side into unfavorable conditions.In response to failure to meet agreed conditions



or performance targets as well as renewalclauses, an exit strategy should be built in toenhance the security of both sides.

Monitoring and review: While many partnershipsuse a formalized contract, in the forestry sector ithas been found that such agreements often do notinclude provisions for review, renegotiations, ordispute resolution mechanisms. In order toaddress unforeseen difficulties, as partnerships

tend to require some mutual learning-by-doingand adaptation, it is important to make provisionsfor review. Some of the tourism agreements inNamibia make explicit provisions for jointcompany/community management committees tomeet periodically and discuss issues arising fromthe partnership.

Mechanisms for sharing information are alsoneeded. One of the concerns of landowners


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TABLE 4. STEPS IN DEVELOPING PRIVATE SECTOR–COMMUNITY TOURISM PARTNERSHIPS IN NAMIBIA

Points to consider

Steps Community Company

1. Identifying apartnershipopportunity

2. Finding out about prospectivepartners

Is the company likely to be suitable?

• Does it have a track record in tourism devel-opment?

• Does it have experience in dealing withcommunities?

• Can it produce a sound business plan?

Is the community likely to be suitable?

• Is it too big?

• Does it have previous tourism experience?

• Does it have a strong institutional structure?

• How dependent is it on tourism?

• What is the skills base like?

• Does it have access to external supportand/or facilitation?

3. Selecting partners How can we make sure we get the best partner?

• Competitive tendering?

• Auction?

• Direct, one-to-one negotiations?

How can we make sure we get the best partner?

• Are there other communities with similartourism assets?

• Do they meet the suitability criteria above?

• Are there any other companies bidding withthe same community?

4. Getting assistance Do we need external help?

• A facilitator who knows the tourism business?

• Help determining a fair return?

Do we need external help?

• A facilitator who understands communityconcerns?

• Someone who speaks the local language?

Have we got what it takes?

• How does tourism compare with other landuses?

• What are our land use priorities?

• What tourism assets do we have?

• How much will it cost?

• Do we have the capacity?

Have we got what it takes?

• Are we prepared for face-to-face meetingswith the community?

• Do we have someone with a personalcommitment to make this work?

• Do we have experience working with commu-nities or do we need to get someone to help?



TABLE 4. STEPS IN DEVELOPING PRIVATE SECTOR–COMMUNITY TOURISM PARTNERSHIPS IN NAMIBIA (cont'd.)

Points to consider


5. Negotiating thecomponents of a deal

6. Deciding on the duration of apartnership

Are we in this forever?• What is the normal length of contract for a

tourism or hunting enterprise?• Can we get out of the contract if the company

fails to perform?• Can we have a renewable contract clause?

How long a contract can we secure?• Does the community understand that we need

security in terms of a contract of reasonablelength if we are to be able to make a signifi-cant capital investment?

• Can we balance our need for security with thecommunity’s wish for flexibility in the face ofuncertainty?

What do we need to think about in the deal?

• Should the enterprise be owned by us, them,or jointly?

• If they own it, do we get a say in a manage-ment?

• Should we opt for a fixed payment or a morerisky but potentially more lucrative success-linked structure?

• What are the minimum costs we need tocover and how much more on top should weexpect?

• Is our payment fair and protected againstinflation, etc.?

• Are we getting a premium for allowingexclusive use?

• How many people are employed and in whatsort of jobs?

• Who decides about recruitment?

• How much will employees get paid?

• Should there be a minimum payment clause?

What do we need to think about in the deal?

• Should the enterprise be owned by us, them,or jointly?

• If they own it, do we get a say in manage-ment?

• Does the community understand the implica-tions of different types of payment options?

• Are we paying the community enough to atleast cover their costs—direct and indirect?

• Do they understand how the overall value ofthe deal has been calculated?

• Have we ensured that payments are fair andeasily verifiable to the community?

• Does the community understand the implica-tions of granting us exclusive use?

• Does the community have realistic expecta-tions about how many people we can employand in what types of jobs?

• Have we ensured that an appropriatecommunity structure is involved in recruit-ment?

• Are we paying a fair wage compared to theirenterprises?

involved in a partnership with XIP in Indonesiawas that they had not been given copies of theagreement they had signed. Moreover, after theoriginal planning meetings, communication fromthe company virtually ceased.

Table 4 provides a summary of guidelinesdesigned for tourism partnerships in Namibia toprovide advice on how both parties can get afavorable deal out of the partnership.

When should a project developer choose apartnership approach?

For the SNRM project developer to opt for a part-nership approach, certain prerequisites must bein place; the most critical being secure landand/or resource tenure and enabling governmentpolicies. The experience in Namibia has shownthe importance of clarifying the rights overwildlife and tourism development on communal

land. In the forestry sector there is no singlemodel of property rights for partnerships—theycan work just as well on communally or individu-ally held land—and the interplay betweencompany-community deals and land tenure hasmany variations. As with the tourism sector, thekey requirement is that the rights to the land andthe associated resources be secure.

Government enabling policies can be specificsuch as the requirement for forestry companies inGhana to enter into social responsibility agree-ments, but a broader base of “carrots and sticks”in policy and institutional frameworks is alsorequired. Particularly important, policies relatingto the provision of start-up funds and favorableloans and insurance packages.

Communities need to have a strong and represen-tative institutional structure to provide a focus for


7. Formalizing thepartnership

How can we prevent any misunderstanding?• Have we got it in writing?• Are the rights and responsibilities of both

sides clearly understood and agreed?

How can we prevent any misunderstanding?• Have we got it in writing?• Are the rights and responsibilities of both

sides clearly understood and agreed?

8. Monitoring,reviewing, andamending a deal

How can we ensure that we continue to get a fairdeal?

• Can we access company records?• Is there a provision for a joint management

committee?• Does the contract allow for changes to the

deal?

How can we reassure the community that it isgetting a fair deal?

• Are we being transparent with our accountingand reporting to the community?

• Is there a provision for a joint managementcommittee?

TABLE 4. STEPS IN DEVELOPING PRIVATE SECTOR–COMMUNITY TOURISM PARTNERSHIPS IN NAMIBIA (cont'd.)

Points to consider



negotiations. This also facilitates communitypreparation. With strong community institutions,it is more likely that community members candiscuss the different options and support thedecisions made. Even where contracts are madewith individuals, as is often the case for forestrypartnerships, it may be worthwhile both for thecommunity and the company to invest in effectiveand representative community institutions tooversee the workings of the partnership.

It is necessary to be clear about the level ofdemand for the partnership product, particularlyin niche markets where the first partnerships maybe very successful and create expectations amongother communities, but the demand may not bethere for subsequent partnerships.

Would-be partners need to be realistic regardingthe conditions that will attract private companies,particularly foreign ones. Where political risk ishigh and initial investment requirements aresubstantial, there have to be clear benefits ofworking with communities to offset the hightransaction costs involved. For tourism, closecommunity involvement can be an asset, forinstance contributing to unique selling points ofthe activity/venture, albeit in a niche market.Where the community has something unique tooffer (e.g., access to a certain wildlife species or arare habitat), the chances of attracting privatesector interest are much higher. In a morecommodity-focused sector such as forestry, anypremiums will typically be for quality, particularhigh quality species, and for sustainable forestmanagement. Community involvement inforestry is less likely to be associated with directmarket benefits for the company concernedalthough there are broader benefits, such as repu-tation improvement.

Support for communities from NGOs and/orgovernment agencies needs to be available on anongoing basis and not just during the preparationand negotiation of the contract. They should beavailable to address issues that come up later(e.g., reviews and amendments to the contract,and dispute settlement). There are also a numberof community and company characteristics thatare important to the outcome of partnerships.Issues rooted in these characteristics need to beaddressed during the negotiations.

Community characteristics that areimportant to the design of the partnership

Skills base: A high level of skill is not essential butwhere skills are lacking, training is a crucialcomponent of a partnership contract, particularlyfor tourism partnerships.

Size: With small groups, individual rather thancommunity benefits may be more significant forencouraging commitment to the venture. If thecommunity is large, an emphasis on communitypayments rather than individual payments canextend financial benefits or increase theirimpacts. Where per capita cash payments arelikely to be small, an emphasis on nonfinancialbenefits is also important. For large communitiesit is also important to allow extra time for negotia-tions.

Dependence on the partnership: Communities thathave few livelihood options are at risk ofbecoming too heavily dependent on a partnership.Conversely, if the partnership is of little signifi-cance to the livelihoods of the community, thenthe community's level of commitment to it islikely to be low.


Lifestyle: Communities may often have a diverserange of livelihood activities (e.g., agricultural orseminomadic activities). For a partnership tosucceed it must complement, not conflict withthese other activities.

Company characteristics that are importantto the design of the partnership

Experience with the community: If the companyhas no previous track record of working withcommunities, it will be important to seek advicefrom or use the facilitation services of communitydevelopment organizations and to accept a slowprocess.

Experience in the sector: There is a higher risk offailure if the company has little or no previous

experience in the activity around which the part-nership revolves. If a community goes into a part-nership with an inexperienced company it shouldconsider ways of reducing the risk to itself.Possible measures include: more secure returns,for example, fixed monthly payments rather thana percentage of turnover or profit; shortercontract period; escape clauses in the contractbased, for example, on nonperformance or poorperformance of the operator.

Target market: A company that has an establishedtrack record in niche markets, for example,among special-interest tourists, is more likely tobe able to make a community-based productwork. Companies whose traditional clientele hasmore generic interests may have a difficult timeselling the partnership’s product.


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Shifting the approach to financing SNRM

Until the 1980s the traditional approach tofinancing SNRM could be described in relation tothe three basic types of NRM, as depicted infigure 4. At one extreme, strict natural resourcesconservation was viewed as a public good, usuallya national public good, dependent on governmentresources for its financing. At the other extreme,sustainable agriculture practices were supposedto lead to larger harvests and increases infarmers’ income; therefore farmers were expectedto pay a significant part of the SNRM costs. Thisapproach has produced some win-win stories ofprotected areas adequately budgeted from publicmoney, and successful farmers practicing sustain-able agriculture.

However, there are also many cases in whichnational budgets for conservation are far belowcorresponding needs, and many sustainable agri-culture initiatives that fail because they do notdeliver enough profits to make them an attractiveoption for the local population (see Gutman 2001).For this and other reasons, the last 15 years havewitnessed a reduction of differences inthe financing approaches for these threeSNRM archetypes. On the one hand,protected areas are increasinglymarketing their services and trying toretain for their own budgets at least partof what users are willing to pay(entrance and users fees, tourismcharges, environmental servicecharges). On the other hand, SNRMprograms in buffer zones and farmingareas are increasingly aware of thepotential of new markets for green prod-ucts and environmental services thatused to go unnoticed and unpaid(ecotourism, wildlife conservancies,water and forest conservation). All ofthis entails new opportunities forfinancing SNRM but also requires more

efforts devoted to designing more complex proj-ects and financing arrangements.

New financing instruments

The discussion in the previous chapters showsthat a substantial number of new financing instru-ments for SNRM have been introduced and triedsince the early 1990s. These financing optionshave many different origins. They range frominternational agreements to pay for the protectionof the global commons (e.g., GEF) or to condonedebt in exchange of poverty alleviation programs(the heavily indebted poor country initiative,HIPC) to country-level earmarking of taxes to payfor conservation programs (e.g., Costa Rica’s oiltax); and from not-for-profit initiatives (environ-mental funds) to market-based approaches (e.g.,markets for green coffee or certified wood prod-ucts). They also entail new forms of private-publicand private sector–community partnerships.

Some critics have dismissed these new financingoptions as being a mere name change. What isthe difference, they argue, among Brazil’s ICMS


4 . F INANCING FOR SNRM: FROM GOODWILL TOPAYMENTS FOR ENVIRONMENTAL SERVICESby Pablo Gutman

FIGURE 4. THE TRADITIONAL FINANCINGAPPROACH TO SNRM

Farming Area Buffer area Strictlyprotected

area

More “grant type” financing(grants, charity, etc.)

More “reimbursable” Financing(credit, savings marketing, etc.)

Less public good character More public good character

Ecológico, Costa Rica’s tax funded PES scheme,and traditional public transfers? Does it make anydifference if we called it foreign aid or paymentsfor the global commons? We submit that it makesa great difference—the difference between a giftand a right; between goodwill and payments forenvironmental products and services.

There is a long way to go and we still need bothgoodwill money and payments for environmentalproducts and services, but there is a significanttrend at work toward a broader acknowledgementof the many environmental products and servicesthat result from SNRM. This is a process thatsimultaneously increases our awareness of theservices that the environment provides, ourresponsibility to care for them, and the rights ofthose who act as stewards of the environment tobe duly compensated.

Less money

Even if there are more financing options, theharsh truth is that throughout the 1990s therehas been a significant reduction in the flows ofworld investment for rural development, naturalresource management, and environmental conser-vation in developing countries. This trend hasbeen reported in several recent World Bankreviews. For instance, the annual World Banklending for agriculture, which was on average$6.8 billion in the early 1980s, plummeted to anannual average of $2.5 billion in the late 1990s.19

A similar dismal trend regarding expenditures inforest management by African governments anddonors is reported in the FAO's recent (2003)State of the World Forests.

To some extent this decline accompanies thedecline in overall foreign aid, and the reduction ofgovernment budgets in developing countries. Butinvestment in SNRM has plummeted deeper thanthe average for several reasons, among them

donors' fatigue with the real or perceived lack ofsuccess of many rural development projects, anda shift in the international interest from the 1980s’focus on sustainable development to the late-1990s’ focus on poverty reduction and HIV/AIDS.Environmental conservation and social develop-ment do go together, but the internationalcommunity seems able to address only a limitednumber of issues at a time.

Financing conservation, rural povertyalleviation, or both?

Do we have to choose between rural poverty alle-viation and sustainable natural resource manage-ment? Some people seem to think so. On therural development and poverty alleviation side,SNRM is at times dismissed as an extra cost withlow returns, or a desirable goal but with lowpriority compared to rural poverty alleviationneeds such as, health, education, infrastructure,water and sanitation, etc.20 From the conservationside, some have given up on the integrated conser-vation and development projects (ICDP) conceptof the 1970s, arguing that it costs too much anddelivers too little in terms of conservation. Theirsolution is that money should be given up-front towhoever is able to provide conservation.21

There is some truth in these arguments. Givenfew natural resources and a lot of people, muchmore than SNRM will be needed to reduce ruralpoverty (although conserving the scarce naturalresources available may still be a priority). Wherethere are abundant natural resources and fewpeople, gazetting new protected areas and makingthem off-limits to the local population may aid inconserving biodiversity (although it may raise


19. From figure 3 in the 2003 World Bank Operation Evaluation Department Precisbulletin No. 232. See other examples of the same trend in the World Bank's2002 Rural Development Strategy and its 2001 Review of the Bank’sPerformance on the Environment.

20. A good example is the lack of consideration given to environmental and naturalresource issues in the poverty alleviation literature and plans of the last decade.As noted in our Summary above, for instance, the World Bank's 2000/2001World Development Report, "Attacking Poverty" does not include the terms"natural resources" or the "environment" in its table of contents.

21. Among the academic supporters of this approach are Ferraro (2001) andHardner and Rice (2002). Conservation International (CI) and The NatureConservancy have tried it in several Latin American countries. See, forexample, the Noel Kempff Climate Action Plan (Bolivia) case study inchapter 6.


ethical and equity concerns). However, theseextreme situations are the exceptions, not therule. In most cases the rural areas of developingcountries are home to valuable environments andlarge numbers of rural poor. There, the tenet ofsustainable natural resource management—thatis, the advantage of integrating environmentalconservation and poverty alleviation—holds true.

To some extent the Millennium DevelopmentGoals (MDG), which have been at the center ofrecent international development discussions,acknowledge these links between poverty and theenvironment: the list of goals begins with eradi-cating poverty and ends with ensuring environ-mental sustainability. Actually, while links andopportunities for positive reinforcement betweenpoverty eradication and several other goals in theMDG list are well established, the truth is thatdevelopment agencies, governments, and NGOsare still at odds in terms of the best way of inte-grating poverty eradication and environmentalsustainability.22

Keeping the rural development focus on inte-grating rural poverty alleviation and naturalresources conservation will surely require all theingenuity of SNRM practitioners and a lot ofmultitasking: first, to design NRM projects thatbalance short-term poverty reduction needs withlong-term sustainability of natural resources;second, to convince advocates of one or the otherthat there are opportunities to jointly foster both;and last but not least, to explore financingarrangements that have a good chance of beingsustainable and accessible to the rural poor.Box 1 in our Summary (p. 11) suggests somecommon-sense principles to help in thisendeavor.23


22. Among recent calls to integrate poverty alleviation and environmental conserva-tion, see the declarations of the Poverty-Environment Partnership, a network ofdonor agencies that includes, among others United Kingdom’s DFID, theEuropean Union, UNDP, and the World Bank.

23. In a complementary approach, the participants in Danida’s Working Group onSustainable Financing have put together a list of "Guiding Questions" (availablefrom Ole Meretz [[email protected]] or Karsten Raae [[email protected]]).

Farmer woman presenting her produce on the market during Master Farmer'sagricultural day in South Africa.

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SECTION 2.F INANCING ALTERNATIVES:A DESCRIPTION

Box 6 shows the 52 financing options discussed inchapter 3, which are described in this chapter inmore detail and grouped under 15 descriptioncards.24 For each group of related financingoptions the description card offers a short expla-

nation of their main features, rates their suitabilityin regard to 11 SNRM concerns, and suggestswhere to go for (a) the money, (b) countryexamples, and (c) more information.25


CHAPTER 5. F INANCING ALTERNATIVES: THE DESCRIPTION CARDS (DCs)by Pablo Gutman

1. Public budget funding of SNRM projects and programs(DC 1)

2. Earmarking for SNRM financing a percentage of oneor more general taxes collected at the national, state,or local level (DC 1)

3. Special laws delivering extra-budgetary financialsupport to particular social groups, geographicalareas, or activities. (DC 1)

4. Tax breaks or subsidies for SNRM activities (DC 1)

5. Earmarking for SNRM financing a percentage of oneor more selective taxes collected at the national,state, or local level. (e.g., taxes on alcohol, tobacco,energy, airports, ports, cruise ships, hotel andresorts charges, and others) (DC 2)

6. Earmarking for SNRM financing a percentage of oneor more charges, fees, fines, and penalties related tothe use (or abuse) of natural resources (e.g., watercharges, groundwater charges, stumpage fees, andother natural resources extraction fees; hunting fees,entrance and user fees in protected areas; chargesfor emissions and feedstock, release or dumping offertilizers, pesticides, solid wastes, toxic wastes; andenvironmental fines and penalties; etc.) (DC 2)

7. National, state, and local development banks’ loans(DC 3)

8. Debt-for-nature swaps (DC 4)

9. Environmental funds (endowment, sinking, andrevolving) (DC 4)

10. Multilateral aid and development agencies (DC 5)

11. International development banks’ loans (DC 3)

12. Bilateral aid and development agencies (DC 5)

13. Community self-support groups and other forms ofsocial capital (DC 7)

14. Secular and faith-based charities (DC 7)

15. Special fundraising campaigns (e.g., “Save thepandas,” “Friends of the national park,” etc.) (DC 8)

16. Merchandising and good cause marketing (DC 8)

17. Lotteries (DC 8)

18. Social and environmental NGOs (DC 9)

19. Foundations (DC 9)

20. Household saving and labor assets (DC 10)

21. Community-based enterprises, formal (co-ops) andinformal (DC 10)

22. Micro-saving, micro-credit, and micro insurance (DC10)

23. Semiformal and informal micro-finance institutions(DC 10)

24. Private investment by local businesses (DC 10)

25. Commercial banks' loans (DC 3)

BOX 6. LIST OF FINANCING OPTIONS AND WHERE TO FIND THEM IN THE DESCRIPTION CARDS

Section 2. Financing Options: A Description 63

24. To avoid repetition, each description card groups several similar financingoptions. The ID numbers in the description cards are the same as the numberson the checklist in chapter one.

25. A number of good guides to financing for conservation and environmental proj-ects have appeared recently, for example, Kloss (2002), The ConservationFinance Alliance (2002), and EPA (1999). We have tried to avoid duplication ofthis literature and throughout these description cards the reader will bereferred several times to these and similar guides (see a detailed list inchapter 7).


26. Direct investment by nonlocal investors (e.g., in eco-tourism, sustainable forestry, etc.) (DC 11)

27. Private-public partnerships (DC 11)

28. Private sector–community partnerships (DC 11)

29. Compensatory environmental investment of largedevelopments (DC 11)

30. Venture capital (DC 11)

31. Portfolio investors (green funds) (DC 11)

32. Markets for organic, agricultural products (DC 12)

33. Markets for sustainably harvested non-timber forestproducts (DC 12)

34. Markets for certified forest products (DC 12)

35. Markets for certified fishery products (DC 12)

36. Resource extraction charges directly collected by theSNRM project (DC 14)

37. Allocating part of national, state, or local extractionfees to SNRM projects in the extraction areas(DC 14)

38. Markets for biodiversity conservation andbioprospecting (DC 13)

39. Markets for carbon offsets (DC 13)

40. Markets for watershed protection (DC 13)

41. Markets for landscape beauty, including ecotourismand tourism (DC 13)

42. Markets for development rights and conservationeasements (DC 13)

43. Quasi-markets and non-market systems of paymentsfor environmental services (DC 13)

44. User fees, entry fees directly collected by the SNRMproject (DC 14)

45. Allocating part of national, state, or local user fees toSNRM projects in the area providing the environ-mental services (DC 14)

46. GEF payments for the global commons (DC 15)

47. Funds for SNRM associated with international treaties(DC 15)

48. Other possible systems of international payments forglobal commons (DC 15)

49. Earmarking for SNRM part of one or more interna-tional taxes (DC 15)

50. Freeing up existing public resources (e.g., redirectingmoney from harmful public subsidies to SNRMprojects) (DC 6)

51. Encouraging the mobilization of private resources(e.g., securing tenure, promotion, regulation stream-lining) (DC 6)

52. Mechanisms to increase the accessibility to andreduce the need for and cost of financing (pooling,insurance, guarantees, leverage, charrettes, financialliteracy training) (DC 6)

BOX 6. LIST OF FINANCING OPTIONS AND WHERE TO FIND THEM IN THE DESCRIPTION CARDS (cont’d.)



DESCRIPTION CARD 1

1. Public budget funding of SNRM projects and programs

2. Earmarking for SNRM financing a percentage of one or more general taxes collected at the national, state, or local level

3. Special laws to delivering extra-budgetary financial support to particular social groups, geographical areas, or activities

4. Tax breaks or subsidies for SNRM activities

Public money is the largest source of financingfor SNRM around the world, and probably willremain so for a long time. The four alternativeslisted above are transfer payments, in that bene-ficiaries are not expected to reimburse themoney they receive. The alternatives differmostly in the time frame and predictability ofthe funding they provide.

Public budgets are negotiated annually; hencethere is uncertainty regarding the amount, andperiod for which the financing will be available.Earmarking part of one or more general taxessuch as corporate taxes, income taxes, propertytaxes, sale taxes, value-added tax (VAT), realstate taxes, and others, may be more difficult toachieve but increases significantly long-termfunding prospects. Still the amount of yearlyfunding available will vary with the amount ofthe tax collected.

Special laws delivering financial support toparticular SNRM programs usually specify theamount of financing and the period for which itwill be available. One drawback is that most ofthese laws are enacted for a limited period oftime. Tax breaks or subsidies for SNRM worksimilarly to a budgetary support or a special law,but because they are specifically targeted tosupport SNRM activities they may be easier tonegotiate.

• Available at what level? Mostly national orstate level. Local governments in most devel-oping countries have little tax authority.

• Mostly available to which type of developingcountry? To middle-income developing coun-tries. Least-developed countries usually havelittle budgetary leeway and a small tax base(e.g., one cannot offer tax breaks to thosewho pay no taxes).

• Mostly used for which type of SNRM?Protected areas / buffer zones / ruralproduction areas. 1 and 2 are used for all ofthem; 3 and 4 are more commonly used inrural production and buffer zones.

• Mostly used for which type of naturalresource? Forests / wetlands / coastalareas / watersheds / agricultural lands.

• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers / local businesses/ national-scale firms / government agen-cies / international corporations. Usuallygovernment agencies play an important role.

• Degree of difficulty in starting up: From lowto high, see below under “Where to go.”

• Need for government facilitation: High.

• Need for third-party facilitation orbrokerage: Low to high. Vying for publicmoney usually requires a lot of lobbying ,but see below under “Where to go.”

• Potential in terms of SNRM achievements:Medium.

• Potential in terms of rural poverty allevia-tion: Medium.

(continued)


DESCRIPTION CARD 1 (cont’d.)

• Transaction costs: from low to high, seebelow under “Where to go.”

Where to go for the money: If the budget orthe tax funds earmarked for SNRM financingare already in place early in the project design,the project developers should contact theagency responsible for the allocation of thoseresources (e.g., department of agriculture, envi-ronmental agency, ministry of naturalresources, etc.) to check the conditions toqualify for financing and to make the case forthe particular project. If the budget line is notthere, the project developers can still engage ina discussion with the responsible agencies totry to include the project’s financing needs infuture budgets. The timeframe is completelydifferent if the tax laws are there but noearmarking for financing SNRM programs is inplace, or worse if the tax laws are not there.Passing new tax legislation requires a lot oflobbying and engaging the legislative branch ofgovernment, and it is a multiyear process. It is afull program in itself, one that may be worthpursuing on its own, but surely it will not beavailable to finance next year’s SNRM project.

Where to go for country examples: Almostevery country has some public budget forSNRM financing, usually administered by thenational or state agencies in charge of rural orenvironmental issues. (See the case of Trinidadand Tobago in Conservation Finance Alliance[2002]). Earmarking for environmentalpurposes small percentages of a variety of localand state taxes, including sales taxes, personalincome, and property taxes is a commonpractice among U.S. states and Europeancountries. Brazil’s “ICMS Ecológico” has been

widely cited as a case of distributing taxrevenues according to environmental criteria.Thus far, it is an initiative in 10 states, where aportion of the state collected VAT is distributedto municipalities according to an environmentalindex. (See case study 3 in chapter 6.)

Where to go for more information:Information on public budget allocation forSNRM with the details required to make ituseful to project developers is in most casesavailable only in-country. When it reaches inter-national publications it is too aggregated to beof much use. See, for example, the report byECLAC-UNDP (2002) on financing for sustain-able development in Latin America; see also anaggregate picture in McNeely (1999) andPagiola et al. (2002). The EPA's “Guidebook ofFinancial Tools” (1999) discusses in detail taxearmarking for environmental purposes in theUnited States that, all differences accounted for,still may be of interest to developing countries'practitioners.



DESCRIPTION CARD 2

5. Earmarking for SNRM financing a percentage of one or more selective taxes collected at thenational, state, or local level

6. Earmarking for SNRM financing a percentage of one or more charges, fees, fines, and penaltiesrelated to the use (or abuse) of natural resources

For many years selective taxes have been inplace in most countries because they are easy tocollect (custom taxes, oil and mining taxes), orthey are easy to justify as a tax on social “sins”(alcohol and tobacco taxes), or a tax on the rich(airport, cars, luxury goods taxes). Selectivetaxes may also have a special appeal to less-developed countries, in that they can target thewealth that exists even in the poorest countries.They may even target foreigners (taxes onairports, hotels, cruse ships, rental cars, foreigncorporations, luxury goods, tourist taxes). Froman environmental perspective, it is doublyappealing to enforce selective taxes on activitiesthat harm the environment, such as dirtyenergy or hazardous products and waste (greentaxes). First, by increasing the cost of theactivity in question the tax will promote areduction on its use and second, it canrepresent a source of funds to invest in environ-mental goods.

Earmarking a percentage of these special taxesto invest in development or conservation is awidespread practice. A stronger case can bemade regarding earmarking for SNRMfinancing a percentage of one or more fees,fines, and penalties related to the use (or abuse)of natural resources and actually, in many cases,these fines, fees, and penalties have beenenacted specifically with the purpose offinancing the management of the naturalresource in question. There are many of thesetypes of fees: water charges, groundwatercharges, minerals and oil extraction fees,stumpage fees, and other natural resourceextraction fees; hunting fees, entrance and userfees in protected areas; emission charges;

feedstock charges; and charges on fertilizers,pesticide, solid wastes, and toxic wastes.

Specific taxes and charges for natural resourcesmay also have drawbacks that need to beaddressed. First, taxes and charges on naturalresources may negatively impact the rural andurban poor whose livelihood depends on free orlow-cost access to natural resources. Second,although most charges for natural resourcesuse are considered low, there are also examplesof cash-thirsty national or local governmentsthat, through overcharging, have chased awaythe golden goose.

• Available at what level? National, state, andlocal. In many cases decentralizationprocesses have given local governments theright to tax and charge for natural resourceextraction.

• Mostly available to which type of developingcountry? All types.

• Mostly used for which type of SNRM?Protected areas / buffer zones / ruralproduction areas.


• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers / local businesses/ national-scale firms government agencies/ international corporations.

• Degree of difficulty in starting up? From lowto high, see below under “Where to go.”

(continued)



• Need for government facilitation: high.

• Need for third-party facilitation orbrokerage: low to high. Vying for publicmoneys usually requires a lot of lobbying,but see below under “Where to go.”

• Potential in terms of SNRM achievements:medium.

• Potential in terms of rural poverty allevia-tion: medium, but see caveat above.

• Transaction costs: from low to high, seebelow under “Where to go.”

Where to go for the money: If the selectivetax or the charges and fees are in place andportions of them are already earmarked forSNRM financing, the project developers shouldcontact the agency responsible for the allocationof those resources early on (e.g., department ofagriculture, environmental agency, ministry ofnatural resources, etc.) to check the conditionsto qualify for financing and to make the case forthe particular project. The timeframe iscompletely different if the selective tax laws arethere but no earmarking for financing SNRMprograms is in place, or worse, if the tax laws orcharge systems are not there. Passing new taxlegislation requires a lot of lobbying, engagingthe legislative branch of government, and it is amultiyear process. It is a full program in itself,and one that may be worth pursuing on its own,but practitioners should not count it among thepossible financing sources for next year’s SNRMproject. This may apply also when trying toenact new charges and fees for naturalresources or trying to earmark a portion of theexisting ones for SNRM financing, but in manycountries levying charges and fees is an admin-istrative decision that does not require a newlaw; therefore it may be easier to pursue.

Where to go for country examples: Somevariety of specific taxes, and charges, fees, andfines for natural resource use and abuse are inplace in most countries, although experts agree

that in most cases charges and fees forrenewable natural resource use are below whatthey should be. Information regardingearmarking is more fragmentary. A well knowncase is Costa Rica’s FONAFIFO (National Fundfor Forest Financing), which receives one-thirdof the country’s fuel sales tax. See also theQuito water payments system in ConservationFinance Alliance Guide (2002), and the Nigerfuel taxes in Richards (1999).

Where to go for more information: Thedetailed information required by a projectdeveloper looking for financing is only availablein-country. On the other hand, there are manyreferences available about tax earmarking ingeneral. OECDs Environmental FinancialStrategy (2002) gives many leads for developingcountries, and the OECD EnvironmentalDirectorate has published a great deal aboutcharges, fees, and specific taxes in OECDcountry members. The EPA's “Guidebook ofFinancial Tools” (1999) has a detailed discus-sion of U.S. experiences in earmarking specifictaxes, charges, and fees at local and state levelsfor environmental purposes. FONAFIFO's Website, http://www.go.cr/fs/sa.html (in Spanish)has the updated information on Costa Rica’sexperience, which is also reviewed in chapter 3of Pagiola et al. (2002).



DESCRIPTION CARD 3

7. National, state, and local development banks' loans

11. International development banks' loans

25. Commercial banks' loans

Commercial bank loans have thus far played alimited role in financing SNRM projects indeveloping countries. Both banks and would-beborrowers have been wary that the high risksand long maturing periods of SNRM projectsmake them unfit for commercial bank loans. Yetthere are examples in which commercial bankshave participated in financing SNRM projects,as intermediaries to disburse public moneys andalso as co-lenders or lenders where collateral,government warranty schemes, and pullingmoney from several sources all reduce the risksboth for lenders and borrowers. By contrast,development banks, both national or interna-tional, are a more active source of SNRMfinancing, owing to their special focus on devel-opment lending, long-term loans, and lowerinterest rates.

In middle-income and large developingcountries, national, state, and local developmentbanks are a major source of financing. Forinstance, in several years during the 1990s theannual money loaned by Brazil’s developmentbanks surpassed the money loaned worldwideby the World Bank. International developmentbanks play a more important role for low-income developing countries. The major playershere are the World Bank, and the four continent-wide banks, IDB in Latin America, ADB in Asia,AFD in Africa, and EBRD in Europe. There arealso some 30 regional development banks thatlend to smaller groups of countries.Traditionally international and regional develop-ment banks lend only to governments to investin specific projects and programs. Recentlythere has been a move among these banks tolend for sectoral or budgetary support and alsoto lend directly to private businesses.

• Available at what level?: National, state, andlocal but in many cases requires goingthrough the national headquarters, orgovernment department in charge of theloan program.

• Mostly available to which type of developingcountry? In-country development banking ismore important in middle-income and largecountries. International and regional banksare more important to low-income and less-developed countries.

• Mostly used for which type of SNRM? Tothe extent that loans must be repaid fromthe project revenues they may appeal moreto rural production and buffer zone projects.But in many cases the government paysback the loans out of its regular budget. Insuch cases, this is not a loan but a budg-etary transfer from the point of view of theSNRM project (see Description card 1).


• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers / local businesses/ national-scale firms / government agen-cies / international corporations.Government agencies are involved in mostcases.

• Degree of difficulty in starting up? From lowto medium.

• Need for government facilitation: High ifloan comes through a government agency.

(continued)



• Need for third-party facilitation orbrokerage: Low.



• Transaction costs: Low.

Where to go for the money: Procedures toborrow from in-country public and commercialbanks vary from bank to bank. Usually the staffof public agencies that work in rural develop-ment and conservation are aware of opportuni-ties to obtain financing from public orcommercial banks, but project developers maywant to check directly with the banks' Web sitesor offices. Most international developmentbanks have a well-developed Web presence andoffices in many developing countries. Most ofthe money from international developmentbanks is channeled through the government,and the staff of public agencies that work inrural development and conservation are awareof existing credit lines. But the staff of govern-ment agencies may be unaware of the manysmall funds and grants that are disbursed byinternational development banks directly tolocal undertakings, so going directly to thesources may improve the outcome.

Where to go for country examples: Lendersare more outspoken than borrowers, and theWeb sites and bookshops of international devel-opment banks are the best place to find countryexamples including information on ongoingprojects. An interesting developing-countryexperience with commercial banks' lending forSNRM is Brazil’s “Green Protocol.” (A descrip-tion may be found in Bayon et al 2002).

Where to go for more information: There isno single source of information. The Web sitesof the large international development banksare good points of reference (www.worldbank.org; www.iadb.org; www.adb.org; www.afd.org).Information on country-level public and privatebanks should be searched locally, but may bedifficult to find, since in most developingcountries, banks, be they public or private, havelittle public relations tradition.



DESCRIPTION CARD 4

8. Debt-for-nature swaps

9. Environmental funds (endowment, sinking, and revolving)

Debt-for-nature swaps have been extensivelyused since the 1980s, particularly in LatinAmerica. They entail redeeming a portion of agovernment’s external debt in exchange for thedeveloping country’s government using anequivalent amount of local currency to financeSNRM projects, usually through an environ-mental fund. They may be government-driveninitiatives; for example, the U.S. governmenthas several of these initiatives for LatinAmerican countries and in tropical forestcountries. More commonly, debt-for-natureswaps have been pursued by internationalNGOs that either act as a broker among theseveral participants—creditor country, debtorcountry, local NGOs—or directly pay a portionof a developing country’s external debt inexchange for the country investing in SNRM.Debt-for-nature swaps amounted to approxi-mately 1 billion dollars by early 2000 (see Kloss2002) and although this is a fairly small amountwhen compared with developing countries’foreign debt, it still is significant in terms ofSNRM project financing. The ongoing interna-tional negotiations to cancel the external debt ofa group of approximately 40 highly indebtedpoor countries (HIPCs) opens an opportunity tofurther promote debt-for-nature agreements.

There is a large variety of Environmental Funds(EFs) around the world. They may get theirmoney as a lump sum initial endowment, havesome ongoing sources of income (e.g.,earmarked taxes, charge fees, fines, etc.), or acombination of both. EFs include:

• Large public or public-private EFs, investingin many types of projects and programs, asis the case with many national EFs inEastern European countries.

• Small, single-purpose EFs, devoted tofinancing one SNRM project.

• Endowment funds, where only the incomefrom the capital may be used.

• Revolving funds where all the money in thefund is used in the form of loans that willeventually be collected and available for anext cycle of financing.

• Sinking funds, to be entirely used up in adesignated period of time.

Money for EFs can come from country sources,bilateral donors, international NGOs, interna-tional agencies (e.g., GEF has contributed toseveral EFs), debt-for-nature swaps, and more.Some international agencies such as theInternational Fund for AgriculturalDevelopment (IFAD) and the GlobalEnvironmental Facility (GEF) are a type of inter-national fund. The former finances rural devel-opment projects including SNRM, and the latteris mandated to finance environmental projects.Both of these funds get their resources fromperiodical contributions from rich countries.

• Available at what level? Debt-for-natureswaps are an international financing alterna-tive. EFs are usually national or local, butthey may get funds from internationalsources.

• Mostly available to which type of developingcountry? All, but there are more opportuni-ties for swaps in less-developed countriesand more opportunities of in-country EFs inmiddle-income or large developing countriesthat have more resources available.


(continued)




• Mostly used with which type of projectparticipant? Since EFs and swap-basedschemes usually give grants, they areexpected to do so to the benefit of theworse-off.

• Degree of difficulty in starting up? Medium to high.

• Need for government facilitation: High in swaps, low to medium in EFs.

• Need for third-party facilitation orbrokerage: High in swaps, medium to high in EFs.


• Potential in terms of rural poverty alleviation: Medium.

• Transaction costs: Medium to high.

Where to go for the money: SNRM projectdevelopers should inquire whether or not theproject qualifies for financing from an ongoingor soon-to-be debt-for-nature swap, EFs in thecountry in question, or an international fund(e.g., IFAD, GEF). But if debt-for-nature swapsor EFs do not already exist, it may be possibleto build them up as part of the SNRM project.There are good examples and there is sufficientexpertise to refer to when engaging in a discus-sion of the pros, cons, and methods (see below).

Where to go for country examples: In thenext chapter we discuss two cases of environ-mental funds (Uganda and South Africa), butmany more are available at the InteragencyPlanning Group on Environmental Funds(http://www.biodiversityeconomics.org/pdf/topics-222-00.pdf). See also the ConservationFinance Alliance Guide (2002) at www.conservationfinance.org. Several cases of debt-for-nature swaps are presented in Quintela et al(2002) and in Kloss (2002).

Where to go for more information: Twointernational NGOs with headquarters in theUnited States, The Nature Conservancy andConservation International (CI) have been veryactive brokering debt-for-nature operations, andtheir Web sites are a good point of entrance(www.tnc.org; www.ic.org). WWF has pioneeredthe establishment of EFs (www.panda.org). Seealso the the Conservation Finance AllianceGuide (2002) (www.conservationfinance.org)and the Web site of the Planning Group onEnvironmental Funds mentioned above.



DESCRIPTION CARD 5

10. Multilateral aid and development agencies

12. Bilateral aid and development agencies

Multilateral and bilateral sources of nonreim-bursable financing are known, in the interna-tional policy parlance, as Official DevelopmentAssistance (ODA). As if to complicate things,many statistics also count loans from theInternational Development Agency (operated bythe World Bank) and other soft credit lines asODA. In regard to loans or credits, even thesoftest of them eventually must be repaid, so itis better to think of them as loans (as discussedin chapter 3).

Most multilateral aid and development agenciesare part of the UN family. UNDP is UN’s overalldevelopment agency, whereas FAO and IFADfocus on agriculture and UNEP on the environ-ment. IFAD has resources to grant but that is notthe case with UNDP, FAO, and UNEP, which areusually low on funds (UNDP sometimes managesthird-party resources). The GEF and other inter-national treaties that provide funds for environ-mental projects are also multilateral sources offinancing (and are discussed in DC 15).

Although rich countries do fund multilateralagencies, they channel most of their interna-tional aid and development grants through theirown development agencies—usually located attheir foreign affairs ministry—on a bilateral,country-by-country basis. Bilateral aid is asignificant source of resources in less-developedand small countries where it may represent asubstantial percentage of the public investmentcapacity. There is a sort of division of laboramong donor countries with some focusing on aparticular group of countries, or a particulargroup of activities to be supported. There is alsosome coordination through periodical countrydonor meetings (in many cases chaired by theUNDP country office). There are differentkinds and number of strings attached to

bilateral aid that may make it more or lessattractive to a particular SNRM project (e.g.,money only to buy in the donor country). Apartfrom its member-country aid agencies theEuropean Union has its own aid program.

As another sort of international donor we mayinclude public or semipublic international insti-tutions or networks, such as the ConsultativeGroup on International Agricultural Research(CGIAR), which do not provide money but canbe an important source of technical advice foran SNRM initiative.

• Available at what level? All the above areinternational sources of grant money.

• Mostly available to which type of developingcountry? Multilateral development aid isunevenly distributed among developingcountries. Small, rich countries tend tospend their bilateral aid in the least-devel-oped countries (e.g., sub-Saharan Africa).Large, rich countries tend to use their bilat-eral aid as part of their foreign policyagenda: the United Kingdom favors theCommonwealth, France the French-speaking countries, the United States thehot spots of its foreign policy, and so on.



• Mostly used with which type of projectparticipant? International and bilateral aidpurports to get to the poor but usually localand foreign providers and governmentalagencies claim part of it.

(continued)




• Need for government facilitation: Low if aidcan be directly disbursed to local stake-holders, medium to high if it needs to gothrough the recipient country's government.

• Need for third-party facilitation orbrokerage: Low to medium.




Where to go for the money: All multilateraland bilateral donors have well-developedInternet resources that may provide initial infor-mation regarding funding availability and proce-dures to submit proposals. UNDP countryoffices are a good entry point for checking theavailability of financing from multilateral aidprograms for your country and type of project.Other UN agencies usually have regional officesor representatives affiliated with the UNDPcountry office, or staff assigned to ongoingregional projects. Most donor countries'embassies have personnel to handle queriesabout their country aid programs. Large donorsmay also have offices of their aid agency inrecipient countries (e.g., USAID offices). Projectdevelopers may contact the head offices of allthe above, but increasingly, project level fundingdecisions are delegated to the country offices.

Where to go for country examples: Severalof the cases presented in the next chapter havebeen partially financed by multilateral orbilateral donors. Many more examples can befound on multilateral and bilateral donor Websites.

Where to go for more information: The bestoverall analysis and information regardingOfficial Development Assistance, both bilateraland multilateral, comes from the OECDDevelopment Assistance Committee and can befound at www.oecd.org/dac. But OECD/DACinformation and analysis are at the country orsector level, so they may be of little assistancein looking for project-level financing informa-tion. For the latter, is best to go to the Web siteof each individual donor. A complete list ofaddresses can be found on the GEF Web site athttp://www.gefweb.org/.



DESCRIPTION CARD 6

50. Freeing up existing public resources

51. Encouraging the mobilization of private resources

52. Mechanisms to increase the accessibility to and reduce the need for and cost of financing

Freeing up existing resources and redirectingthem to better uses may be an important sourceof government money for SNRM. Some havecalled this and similar saving and redirectionschemes “zero financing” opportunities.Pundits have focused on the potential of elimi-nating harmful subsides, such as energy andagricultural input and output subsidies. Theyargue that these subsidies have little socialbenefit and encourage natural resourcesmisuses. Unfortunately eliminating existingsubsidies is not a simple task. What looks like awaste of money to many, surely does not lookthat way to its beneficiaries. To complicate theissue, the beneficiaries of the subsidies and thewould-be beneficiaries of the subsidies’ elimina-tion may even be in different countries (e.g., thefarmers in Europe, the United States, and Japan,and the farmers of developing countries).

Another avenue for reducing financing needsrests with measures to encourage the mobiliza-tion of private resources. For example,regarding SNRM projects, there is a large bodyof evidence supporting the fact that clarifyingand securing participants’ rights to naturalresources will increase their willingness toinvest their own time and savings in theresources' sustainable management, hencereducing the needs for external financing. Therange of possible systems is wide—from indi-vidual ownership of agricultural plots tocommunal ownership of pastures and forestareas, to rights to use, harvest, or collect wildspecies in buffer zones and protected areas, etc.These rights to natural resources can be whatthe local community brings to a partnershipwith external sources of capital, or may be used

as collateral to a loan reducing the cost ofborrowing.

Finally, there is a large array of instruments toreduce the cost of and increase the accessibilityto financing—among them pooling financing,which consists of combining several projects inthe search for financing. The benefits of poolinginclude the following: (a) the presence of moreprofitable components may facilitate thefinancing of the less profitable ones, (b) itreduces transaction costs, (c) it gives access tofinancing sources for which each individualproject may not qualify, and (d) it increases visi-bility and public relation outreach.

Private or public insurance or guaranteedschemes reduce the cost of borrowing, increasethe availability of loans, and may also attractinvestors. They are widely used in private busi-nesses and international lending but thus farhave been little used in SNRM projects.

Leveraging has a kind of “domino effect” onproject financing—if the project obtainsfinancing from x, z will be more willing tofinance the project. Leveraging may be formalor informal, with the latter being a littleconfusing for the project developer since it isnot always clear who is leveraging whom. In anycase, leveraging is a standard in SNRMfinancing in that few financial sources want toparticipate alone.

According to EPA’s “Guidebook of FinancialTools” (1999), a charrette is a forum whereagencies or project developers meet financeexperts from the public and private sectors torequest advice on financing issues. Public sector

(continued)



participants may come from national or stateagencies involved in the project. Private sectorexperts may come from business and industry,banks and other financial institutions, and theconsulting firms. Typically, a charrette lasts ahalf-day beginning with a description of theproject’s financing needs, followed by questionsand answers and recommendations by partici-pant experts as individuals and/or as a group.The proceedings are taped and the results aresummarized.

Finally increasing financial literacy, financialtraining of project developers, and financialadvice from experts will usually result in betterfinancing arrangements for SNRM projects, andthere are many ways formal and informal, topursue it (see below and also chapter 7,“Accessing references and resources”).

• Available at what level? Freeing publicresources and encouraging the mobilizationof private resources is mostly a nationalgovernment endeavor, but the sameapproach can be useful at state and locallevels and the conceptual approach mayeven be useful to audit nongovernment insti-tutions. Mechanisms to increase accessi-bility and reduce the need for and cost offinancing are available at all levels, but maybe more significant at the project orprogram level.




• Mostly used with which type of projectparticipant? All types.

• Degree of difficulty in starting up? Low(Mechanisms to increase….) to high(Freeing up public resources…).

• Need for government facilitation: Low(Mechanisms to increase….) to high(Freeing up public resources…).

• Need for third-party facilitation orbrokerage: Medium to high.

• Potential in terms of SNRM achievements:Medium to high.

• Potential in terms of rural poverty allevia-tion: Medium to high.

• Transaction costs: Low (Mechanisms toincrease….) to high (Freeing up publicresources…).

Where to go for the money: These alterna-tives are not about new money but about how toaccess (or how to better access) existing money.

Where to go for country examples and formore information and support: Pagiola et al.(2002) give some examples of recent reductionsin energy and water subsidies in several devel-oping countries (and more can be found on theWorld Bank's Web site). Unfortunately there isno indication that the freed money went tosupport SNRM initiatives (actually there is noindication where it went). EPA’s “Guidebook ofFinancial Tools” (2002) (www.epa.gov/efinpage/guidebk) is a good source of examples on howto save on financing needs. To increase SNRMfinancing literacy refer to the Training Guide ofthe Conservation Finance Alliance atwww.conservationfinance.org. Other guide-books and Web resources listed in chapter 7offer detailed financing guidelines, in somecases even providing the spreadsheets for thenumber-crunching of a financial plan. SNRMpractitioners looking for accessible advice mayfind it in nearby universities’ business schoolsthat usually have free consultation programs, orwith international rural development andconservation agencies and NGOs.



DESCRIPTION CARD 7

13. Community self-support groups and other forms of social capital

14. Secular and faith-based charities

Community self-support groups and localsecular and faith-based charities may be asource of money and in-kind financing for anSNRM project. Even if these contributions aresmall they may be crucial in that they willincrease the local community’s buying-in andownership of the SNRM project.

From a broader perspective, community self-support groups and local secular and faith-basedcharities are just two of the many possibleexpressions of a community’s social capital. Acommunity’s social capital encompasses alltypes of local organizations that increase thecommunity’s capacity to discuss, agree on, andimplement shared goals, as well as its capacityto campaign for its goals and to leveragesupport and resources. Social capital is animportant component in most SNRM projectsbecause, in many cases, a natural resourcemanagement project will involve the manage-ment of common resources (a local forest, awatershed, a conservation area). Hence, SNRMprojects usually require community-leveldecisions regarding land uses, natural resourcemanagement practices, and so on. In turn, thesedecisions require community-level discussions,agreements, and actions. In addition, most ruraldevelopment or conservation projects need toleverage external resources, and here again ahigh level of social organization can increase thevisibility and appeal of the SNRM project amongpotential funders.

• Available at what level? Mostly local level(but in some cases there are national federa-tions of local organizations).




• Mostly used with which type of projectparticipant? Rural communities, landlessrural poor peasants, and small farmers.

• Degree of difficulty in starting up? Low tomedium.

• Need for government facilitation: Low.





Where to go for the money: The investmentof community resources needs to be brokeredas part of the consultations with the local projectparticipants. Secular and faith-based charitiesmay already be established in the community orthe SNRM promoters may scout them based intheir thematic or geographic focus.

Where to go for country examples: All inter-national and national agencies and NGOs thatwork on SNRM or ICDPs in developingcountries’ rural areas have examples of localstakeholders' co-financing of rural conservationand development programs. See, for example,in chapter 6 the case of Ecuador’s participativeforest development in the Andes, and the caseof the El Pital Agroforestry project on CARE’s

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Web site (http://www.care.dk/eng/projects/nicara.htm).

Where to go for more information: Checkthe Web sites of FAO, IFAD, Oxfam, WWF, CI,and CARE for examples and guidelines on how

to mobilize local community support for SNRMprojects. You may also visit the GDRC VirtualLibrary of Micro Credit at http://www.biodiversityeconomics.org/pdf/topics-222-00.pdf.

Elephants conveying a load of elephant grass fodder. Manas National Park. Bhutan.

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DESCRIPTION CARD 8

15. Special fundraising campaigns (“Save the pandas,” “Friends of the national park,” etc.)

16. Merchandising and good cause marketing

17. Lotteries

Special fundraising campaigns (to save thepandas, support a national park, adopt a village,etc.); merchandizing (e.g., selling products asso-ciated with the SNRM project, in park shops orNGO shops); and good cause marketing (e.g.,selling standard products with a mark-up topeople willing to pay a premium to support agood cause) are all fund raising strategies exten-sively used by NGOs, government agencies(e.g., national parks), and international agencies(e.g., UNICEF). Sometimes the money collectedwill support the full array of activities under-taken by the fundraising institutions, but thereare also many cases where the drive is insupport of a particular SNRM project. However,these financing options are seldom available topay for the initial SNRM project costs; they aretypically a source of income after the project iswell established.

According to the WWF-US's Center forConservation Finance (see Spergel 2001)earmarking a percentage of national or statelotteries for conservation has raised largeamounts of money for SNRM projects in manycountries. For example, in the United States theColorado State Lottery raises over 60 milliondollars a year for conservation programs in thatstate and WWF-Netherlands has received tensof millions of dollars from the Dutch nationallottery to finance SNRM projects in developingcountries.

• Available at what level? International andnational levels.

• Mostly available to which type of developingcountry? Middle-income developing coun-

tries may target their own wealthy popula-tions, but poorer countries may find amarket in foreign tourists and foreign coun-tries. Playing the lottery, however, ispopular at all income levels.

• Mostly used for which type of SNRM?Protected areas, or other conservationprograms in that they are more“marketable” than rural development, buthighlighting the social dimension of SNRMprojects may make them marketable as well.

• Mostly used for which type of naturalresource? Any one of them where a wellknown feature (e.g., a flagship species)attracts support.

• Mostly used with which type of projectparticipant? Rural communities, as the finalrecipients, and NGOs and government agen-cies as the intermediaries.

• Degree of difficulty in starting up? Low tohigh depending on the scale.

• Need for government facilitation: High inthe case of earmarking part of public lotteryrevenues, low for all others.

• Need for third-party facilitation orbrokerage: Medium to high to reach anational or international audience, low if it isan on-site initiative.

• Potential in terms of SNRM achievements:Low to medium.

• Potential in terms of rural poverty allevia-tion: Low to medium.


(*) To avoid repetition, each description card groups several similar financing options. The ID numbers in the description cards are the same as the numbers on the checklist.

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Where to go for the money: For the SNRMproject developer there are the options of (a)tapping into the income of an ongoing system offundraising campaigns, merchandizing, goodcause marketing, or lotteries; (b) asking for thesupport of these ongoing programs to help setup a fundraising scheme for the new SNRMproject in question; and (c) trying to put ascheme in place on her/his own. We stronglysuggest first trying options (a) and (b).

Where to go for country examples: Richcountries such as the United States, theNetherlands, and the United Kingdom havemore examples of earmarking a portion oflottery incomes for conservation programs thanpoor countries. Several developing countries,such as South Africa, and NGOs such as WWFhave had good experiences with special

fundraising campaigns, merchandizing, andgood cause marketing. (See www.panda.org).

Where to go for more information: ConsultEPA's “Guidebook of Financial Tools” (1999)(www.epa.gov/efinpage/guidebk); the TrainingGuide of the Conservation Finance Alliance atwww.conservationfinance.org; and the Web sitesof WWF and The Nature Conservancy for moreon these alternatives.



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18. Social and Environmental NGOs

19. Foundations

Most SNRM projects in developing countriesinclude among their stakeholders a local ornational NGO. Teams and resources from inter-national NGOs also support many SNRMprojects in developing countries. NGOs maybring their own financing resources andleverage financing from other sources orchannel resources from governments, donoragencies, and the public at large. NGOs are alsoan important source of expertise, training, andadvocacy for SNRM. Several NGOs have beenin the forefront of developing and applying inno-vative financing instruments including environ-mental funds, debt-for-nature swaps, integratedconservation and development projects, certifi-cation of green products, fundraisingcampaigns, and PES schemes.

Several middle-income and large developingcountries have national foundations that grantmoney to a variety of initiatives and projects,and there is a large number of foundations inrich countries that support social and environ-mental initiatives in developing countries. Thereare thousands of NGOs and foundations in theworld, but the major players (in terms of budgetand projects) number in the dozens, and aremostly headquartered in rich countries.

Foundations provide money in accordance withtheir priorities regarding issues, countries, insti-tutions, and beneficiaries. It is rare that anNGO would give as much money as a founda-tion does. NGOs prefer to be an active partnerin the project, so it may be sensible to approachthem much earlier in the SNRM project devel-opment.

• Available at what level? Local, state, national,and international.

• Mostly available in which type of developingcountry? NGOs are present in all developingcountries. Foundations tend to concentratein rich countries.

• Mostly used for which type of SNRM?Protected areas / buffer zones / ruralproduction areas. But priorities vary widelyamong foundations and NGOs.


• Mostly used with which type of projectparticipant? Usually NGOs and foundationsfocus on the poor and tend to bypassgovernment agencies.

• Degree of difficulty in starting up? Fromlow to medium.





• Transaction costs: Low to medium.

Where to go for the money: Expect stiffcompetition for grant money. We suggest thatthe SNRM project developer undertake both abottom-up and top-down approach. The bottom-up approach would consist of an assessment ofwhich NGOs or foundations are or have beenactive in the local area of the project, and thenpursuing this lead up to the headquarters ofthese institutions. The top-down approachinvolves contacting the headquarters of largeNGOs and foundations and assessing their

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interest in the goals and locations of the SNRMproject.

Where to go for country examples: Most ofthe SNRM projects discussed in the followingchapter have included national and internationalNGOs. A few mention receiving money fromprivate foundations. Large NGOs and founda-tions (e.g., Oxfam, CARE, WWF, CI, The NatureConservancy, and the Ford Foundation) discussmany such cases on their Web sites. (Visit www.panda.org or www.conservation.org.) Anexample of a project partially funded by theFord Foundation is the Zimbabwe Maheneywildlife project, which is discussed in http://www.fordfound.org/publications/recent_articles/docs/Solutions_68-73.pdf.

Where to go for more information: TheFoundation Center (www.fdncenter.org) has anabundance of information about thousands offoundations including what they fund and which

countries they invest in, as well as links to Websites. Although it mostly focuses on the over-70,000 U.S. foundations, it also has informationon non-U.S. ones. The web site of theWorldwide Initiative for Grantmakers Supportwww.wengeb.org is also a point of entrance tonumerous foundation sites. A directory of Websites of conservation NGOs around the worldcan be found at http://www.lib.kth.se/~lg/front.htm. The National Wildlife Federation–U.S. (www.nwf.org) has published an extremelycomprehensive guide to U.S. conservationNGOs.



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20. Household savings and labor assets

21. Community-based enterprises, formal (co-ops) and informal

22. Micro-saving, micro-credit, and micro-insurance

23. Semiformal and informal micro-finance institutions

24. Private investment by local businesses

Mobilizing the participant households’resources is crucial to the local ownership ofthe SNRM project. In the last 20 years, ruraldevelopment projects have had many experi-ences in this. For example, households mayinvest in improvements of their own plot inorder to benefit from the new opportunities thatthe SNRM project would bring to the area.Cooperatives may be organized to sell the newproducts that the SNRM project will deliver.Revolving credit schemes based in formal andinformal financing arrangements such as thewell-known Grameen bank from Bangladesh canbe put in place. Participants can also contributetheir labor—for example by working in theirplots and in communal lands, operating andmaintaining new or existing infrastructures, andmore. New activities generated by the SNRMproject may also spur investment by current orwould-be local businesses ranging from localcapital investing in lodging for tourists to theroadside sale of handicrafts. According to theSNRM project design these fringe commercialactivities may be seen as part of the project andas such be included in its financing schemes ormay be considered as positive spillover of theSNRM project but not part of it.

Experience shows that in order to motivaterural households to invest in SNRM, projectsneed to feature a good prospect for short-termbenefits within the levels of risk acceptable tothe participants. There is a trade-off here in thatthe smaller the share of the family incomeinvested in the success of the SNRM project thesmaller the risk it entails, but as the prospective

benefits decrease so may the interest of thelocal participants.

• Available at what level? Local.


• Mostly used for which type of SNRM? Ruralproduction areas and buffer zones wherechances of investment in SNRM projectshaving a clear return to local dwellers arelarger.


• Mostly used with which type of projectparticipant? Peasants and small farmers /large commercial farmers / local busi-nesses.

• Degree of difficulty in starting up? Fromlow to medium.






Where to go for the money: This is a locallybased activity to be developed by the SNRMproject team. Similar experiences in the project

(continued)



area or elsewhere can be sources of ideas onhow to proceed when trying to get local house-holds to invest in the project.

Where to go for country examples: Severalprojects discussed in the following chapterinclude financing from the local population.Most cases of green production or localecotourism will include partial financing by thelocal participants. See also Pagiola et al. (2002)for the description of shade-grown coffee inMexico and El Salvador; Mayers and Vermulen(2002) for a discussion of India and Nepal’s

community forest projects; and the IFAD andFAO Web sites for more experiences and waysto organize local financing schemes.

Where to go for more information: Look inFAO’s People Participation Program at http://www.fao.org/sd/Ppdirect/PPre0004.htm for adiscussion on how to mobilize local savings, andat http://www.fao.org/sd/Ppdirect/PPan0015.htm for experiences with informal localfinancing. See IFAD's experience with financingin rural areas at www.ifad.org/pub/other/rural_e.pdf.



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26. Direct investment by nonlocal investors (e.g., ecotourism, sustainable forestry, etc.)

27. Private-public partnerships

28. Private sector–community partnerships

29. Compensatory environmental investment of large developments

30. Venture capital

31. Portfolio investors (green funds)

When discussing private financing of SNRM indeveloping countries we may refer to twodifferent issues. One is private businesses'(national or transnational) financing of SNRMon part or all of the large tract of naturalresources they directly own, control, or use indeveloping countries (these resources mayinvolve or include minerals, oils, forests, planta-tions, ranching, large farming, food and feedindustry, tourism and hotel chains, etc.) Theother is private businesses' financing of SNRMprojects that have participation from smallfarmers, the rural poor, and rural communities.Perhaps needless to say, the former dwarfs thelatter in terms of the money and in many casesalso in terms of the natural resources involved.However, we are not addressing it here sincethis survey focuses on financing SNRM projectsamong the rural poor.

There are many reasons to try to attract extra-local private investors to the financing of SNRMprojects in the poor rural areas of developingcountries: these investors may contributeresources far larger than the ones availableelsewhere; they can bring much-neededtechnical and commercial knowledge; they canbridge local SNRM projects with countrywide orworldwide markets; and so on. There are alsolegitimate concerns, particularly regarding thedistribution of costs and benefits among thewould-be partners, and also regarding the riskof natural resource overexploitation in order tomeet the benefit expectations of the privatebusinesses and the local communities.

Private business financing of SNRM projects inrural areas of developing countries may includedirect investments that take up one or morecomponents of the SNRM project (e.g., thehospitality component of an ecotourism project);or private-public partnerships (e.g., developingpublicly owned natural resources); or privatesector–community partnerships (e.g., privateindustries supporting and buying a communityforest production). A different, more grant-typefinancing emerges when large private develop-ments—such as dams, oil and miningcompanies—pay for environmental or socialprojects as a compensation for the environ-mental or social disruption they may cause. Yetanother source is private business financing ofenvironmental initiatives as part of its publicrelation campaign, or business ethics.

In rich countries there is an increasing numberof investment funds that keep “green portfo-lios.” These are funds that invest in shares ofgreen or socially conscious businesses, butthere are few similar endeavors in developingcountries (see below for a reference to Brazil'sgreen fund). Even more farfetched is theprospect of venture capitals financing SNRMprojects (venture capital funds high-risk invest-ments in new and promising businesses inexchange for a share of future earnings). Still,some future breakthrough, for example in theprofitability of bioprospecting, may put thesefinancing mechanisms within the reach ofSNRM projects.

(continued)



• Available at what level? International andnational.

• Mostly available to which type of developingcountry? All, although less-developed coun-tries may have to rely more on transnationalbusiness.

• Mostly used for which type of SNRM? Tothe extent that the financing is profit-oriented, these mechanisms may appealmore to rural production and buffer zoneprojects, and protected areas with hightourism potential.


• Mostly used with which type of projectparticipant? Rural communities / smallfarmers / large commercial farmers /national-scale firms / government agencies /transnational businesses.

• Degree of difficulty in starting up? Mediumto high.

• Need for government facilitation: Low fordirect private investment. For private-publicpartnership and private sector–communitypartnership it can go from low (if the legalframework and institutions to support thesetypes of partnerships are already in place) tohigh (if those are missing).

• Need for third-party facilitation orbrokerage: Medium to high.

• Potential in terms of SNRM achievements:Low to medium.


• Transaction costs: Low for direct privateinvestment, high for all others.

Where to go for the money: Engaging privatebusinesses in financing SNRM projects in poorrural areas is case-by-case work. Project devel-opers should look around to see which busi-

nesses are already active in the project areaand/or in the products and services the SNRMproject will deliver (from tourism to sustainableforest management). On the national level theyshould check which private businesses haveinvested in similar projects elsewhere in thecountry; look for ideas in other countries’ expe-riences (e.g., which type of firms were moreinterested? who sold them the SNRM projectidea?); ask business chambers and publicagencies for leads to potentially interestedprivate firms, and establish exploratory contactswith potential private investors. Even if thoseindividuals decline to invest in the project, thediscussion may give the SNRM project devel-opers a better understanding of how to makethe project proposal more appealing to privateinvestors.

Where to go for country examples: Chapter6 presents summaries of several privatebusiness- community projects, such as SouthAfrica’s outgrower schemes, Bolivia’s NoelKempff Climate Action project, and Namibia'sTorra Conservancy. Bayon et al. (2000) discussThe Terra Capital Fund and EcoEnterprisefunds, both green funds consisting of private,public, and NGO capital to invest in environ-mental projects in Latin America.

Where to go for more information: Chapter3 discusses private sector–community partner-ships based in the recent Mayers and Vermulen2002 review of company-community forestrypartnerships and Roe, Grieg-Gran, andSchalken's (2001) review of privatesector–community tourism. Both texts can beaccessed at www.iied.org.



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32. Markets for organic agricultural products

33. Markets for sustainably harvested non-timber forest products

34. Markets for certified forest products

35. Markets for certified fishery products

From early on, project developers have beenaware that SNRM may not just produce moregoods but different goods as well, green goodsthat may attract a premium at the marketplace.Organic food, ecological coffee, non-timberforest products, certified timber, certified fish,and many other sustainably produced goodscompete today in the global marketplace, insome cases aiming to conquer a small marketniche, in other cases vying to becometomorrow’s market standard.

Financing SNRM projects with the sale of greenproducts is undoubtedly attractive in that itwould match SNRM efforts with markets willingto pay for them. Many examples of successesand failures are offered, feeding a lively polemicas to the potential and limitation of greenproducts to foster environmental conservationand improve rural livelihoods. There has alsobeen a learning curve as SNRM practitionersrealize the importance of understanding or evencreating the markets (e.g., developing marketsfor certified wood), and also understanding theinstitutional and commercial barriers that mayhinder the rural poor’s participation in marketsfor environmental products and services (moreon this can be found in chapters 2 and 3).

One drawback of market-based financing is thatmoney will come late in the project cycle, oncethe goods have been produced and sold. Thus,the need to raise financing for the start-up costsremains. A project with a very good marketprospect may be able to leverage financing forstart-up costs, but few SNRM projects dare torepay initial costs out of market sales; instead

they will usually reserve the market incomes topay for the operation costs and to increase theparticipant’s income.


• Mostly used for which type of SNRM? Ruralproduction and buffer zones.


• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers / local busi-nesses.

• Degree of difficulty in starting up? From lowto high depending on the scale of theproduction and the market.

• Need for government facilitation: Low toreach local markets, high to reach nationalor international markets.

• Need for third-party facilitation orbrokerage: Low to high.



• Transaction costs: Medium to high.

Where to go for the money: For thoseplanning to finance part or all of an SNRMproject through the sale of green products, itmust be noted that profits are not immediately

(continued)



available (sometimes not for years). So even ifan SNRM project is about marketing greenproducts it will probably have to begin bysearching for start-up financing from any of theother sources we have discussed before (localpeople’s savings, a grant, public support, etc.).The difference is that here the project developermay use the prospect of the future sales ofgreen products to leverage the start-upfinancing. In order to do so a solid productionand marketing plan may be required. Projectdevelopers may want to (a) look around to seewhich markets for the would-be green productsalready exists at the local, national, and interna-tional levels; (b) get solid marketing advice; (c)study similar successful schemes; and (d) avoid

overselling the market prospects to the localparticipants or would-be financiers.

Where to go for country examples: Look forseveral of them in chapter 6. The reader isreferred also to the experience of the ForestStewardship Council, the most importantscheme of forest product certification, whichcan be accessed at www.fscoax.org.

Where to go for more information: ForestTrends (www.forests-trends.org) has producedinteresting research outcomes and guidelineson what is needed for the rural poor to partici-pate in green forest markets. Also from ForestTrends see Sherr et al. (2002).



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38. Markets for biodiversity conservation and bioprospecting

39. Markets for carbon offsets

40. Markets for watershed protection

41. Markets for landscape beauty, including ecotourism and tourism

42. Markets for development rights and conservation easements

43. Quasi-markets and non-market systems of payments for environmental services

The rationale for payments for environmentalservices is straightforward. Many SNRMschemes do not yield returns because what theydeliver largely consists of environmentalservices that are not currently paid for, be theyat local scale (e.g., soils and water protection);national scale (e.g., watershed protection, biodi-versity, landscapes); or international scale (e.g.,biodiversity, carbon sequestration). Shouldthese services be accounted for and paid for,SNRM would be much more attractive andrewarding to those that bear the cost of it,particularly the rural poor.

Although the amount of money that has thus farbeen raised for SNRM through PES in generaland MES in particular is small, there are highhopes that scaling-up may be possible, particu-larly through carbon trading (based on theKyoto Protocol of the International ClimateChange Convention). In relation to the KyotoProtocol, Denmark, Norway, and otherEuropean countries have been active infinancing Clean Development Mechanismprojects, namely projects in developingcountries that are beneficial to the recipientcountry and at the same time result in a netreduction in greenhouse gasses emissions.

One drawback of financing SNRM projectsthrough PES is that money is received once theservice has been provided, which often takestime. Consequently the need to raise financingfor the start up costs remains. Extremelypromising PES prospects may be able to attract

financing for start-up costs, but to this day fewstart-up costs have been repaid out of PESincomes. Typically PES projects have benefitedfrom other sources of initial support and haveused the PES incomes to cover the operationcosts and increase the participant’s income.

• Available at what level? Regional, nationaland international. The local scale will usuallyprove very small to encompass bothproviders and users of environmental serv-ices.

• Mostly available to which type of developingcountry? All for international schemes ofPES but large and middle income devel-oping countries mostly in the case of in-country PES schemes.



• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers / local businesses/ national-scale firms / government agen-cies / international corporations.

• Degree of difficulty in starting up? Mediumto high.

(continued)



• Need for government facilitation: Medium tohigh.

• Need for third-party facilitation orbrokerage: High.

• Potential in terms of SNRM achievements:Low in the short run to medium in the longrun.

• Potential in terms of rural poverty allevia-tion: Low in the short run to medium in thelong run.

• Transaction costs: High in the short run,may decrease in the long run.

Where to go for the money: When consid-ering financing part or all of an SNRM projectthrough a PES approach the project developersshould look around to see if a related PESscheme to which the project could be integratedalready exists at the subnational, national, orinternational level. If that is not the case practi-tioners should be aware that developing a PESscheme from scratch may take several years(though the same can be said of trying to put inplace many other financing mechanisms such astrying to pass a law to earmark public funds forSNRM). Even when a PES scheme is already inplace, actual payments may take a long time tomaterialize since the SNRM project may beasked to deliver these services to some agreedstandard before collecting payments. In thatcase the SNRM project developer needs to lookfor other financing sources to pay for theSNRM project's start up costs. The differenceis that now the SNRM project may be able to

use the prospect of future sales of environ-mental services to leverage the initial moneyrequirements.

Where to go for country examples: Look forseveral of them in chapter 2. IIED (www.iied.org) has an extensive portfolio of PES casestudies available through its Forestry and LandUse Program. Chomitz et al. (1998) discuss indetail Costa Rica’s experience with PES.Hardner and Rice (2002) briefly discuss conser-vation concessions in Guatemala, Indonesia, andPeru. Also, the World Bank's EnvironmentalDepartment features case studies of PES on itsWeb site.

Where to go for more information: Chapter2 of this survey summarizes the extensiveresearch on PES recently published by IIED.See Landell-Mills and Porras (2002) and visitwww.iied.org. More information is available atthe World Bank's Environmental Department(www.worldbank.org/eadvisor).



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36. Resource extraction charges directly collected by the SNRM project

37. Allocating part of national, state, or local extraction fees to SNRM projects in the extraction areas

44. User fees and entry fees directly collected by the SNRM project

45. Allocating part of national, state, or local user charges to SNRM projects in the area providing theenvironmental services

Applying all or part of natural resources–relatedincomes to SNRM, can be seen as a form ofpayment for environmental products orservices. The relation may be direct—forexample, national parks keeping the moneycollected as entrance fees, or local communitiesengaged in wildlife conservation receiving all orpart of the incomes generated by safaris andecotourism. Or it may be indirect; for example,in many countries the central government orthe state government collects extraction anduser fees and redistributes them to state andlocal governments, which, in turn, may use allor part of these fees to finance SNRM projects.There may be good reasons for concentratingand redistributing schemes (e.g., supporting themost remote or poor areas); unfortunately, inmost of these cases a substantial portion ofthese incomes get diverted to uses not relatedto the sustainable management of the naturalresource base that generates them.

Most countries have well-developed systems ofcharges for the extraction of oil and mineralsbut charges for extraction or use of renewablenatural resources (e.g., forest, water, effluentdischarges) or environmental services (e.g.,watershed management, biodiversity conserva-tion) may range from very low (e.g., stumpageand grazing fees) to nonexistent (e.g., water,biodiversity). In the last 20 years manycountries have either put in place or haveconsidered putting in place more comprehen-sive systems of charges for extraction and useof natural resources, either at the local, state, ornational level. So these charges have become or

may become an important source of financingfor SNRM projects.

Developing countries (and the internationaladvisors that some times oversell theseschemes) should carefully weigh the impactthat charging extraction or user fees may haveon the poor, and if needed put in place bufferingmeasures to protect their livelihood.

• Available at what level? National, state, andlocal.

• Mostly available to which type of developingcountry? All, but see above on equity andlivelihood concerns.



• Mostly used with which type of projectparticipant? Rural communities / landlessrural poor / peasants and small farmers /large commercial farmers.


• Need for government facilitation: Medium to high.



(continued)





Where to go for the money: If the legalframework already exists, the SNRM projectdeveloper should make sure that the projectparticipants are either eligible to receive part ofthe money that is being collected or are entitledto collect it themselves. In many cases clarifyingand strengthening the property and user rightsis a precondition for the local community to beable to claim the rights to collect naturalresource–related fees, or to receive a portion ofthe fees collected by the state. If the legalframework is missing it may still be possible todevelop it as part of the SNRM project, but itwould be worthwhile to carefully assess howcomplicated that would be. In any case therewill usually be some activities that the SNRMproject needs to undertake before it is able tocollect the would-be fees, and the financing forthese activities may need to be secured fromother sources.

Where to go for country examples: ManyAfrican countries have systems in placewhereby communities are engaged as stewardsof the local wildlife and receive all or part of the

safari fees collected. See in the next chapter thecase study on Zimbabwe's Campfire andNamibia's Torra Conservancy. See also theConservation Finance Alliance Guide (2002) fordiscussions of Suriname's bioprospectingscheme. Shilling and Oscha (2003) brieflydiscusses several more cases.

Where to go for more information: IIEDhas evaluated and discussed many cases ofcommunity-based biodiversity and wildlifeconservation projects of this type. See them atwww.iied.org. WWF has been a promoter andpartner of similar schemes around the world,one of the largest being the Namibia LIFEproject, which can be accessed atwww.panda.org.



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46. GEF payments for the global commons

47. Funds for SNRM associated with international treaties

48. Other possible systems of international payments for global commons

49. Earmarking for SNRM part of one or more international taxes (so far hypothetical)

The term “global commons” refers to the envi-ronmental components of global public goods.The latter, following a UNDP definition (Faust etal. 2001), are public goods whose benefits arestrongly universal in terms of countries, people,and generations. The atmosphere, the oceans,biodiversity, and tropical forests are allexamples of global commons. Internationalpeace, the control of pandemics, and the eradi-cation of poverty are all examples of nonenvi-ronmental global public goods. The adequateprovision of public goods is difficult to achieveeven at a national scale, usually requiringgovernment interventions to force the benefici-aries to pay the suppliers (e.g., through regula-tions, taxes, the creation of special markets,etc.). Imagine the difficulties in securing theprovision of global public goods on the interna-tional scale where there is no world authority toregulate, tax, or create markets. Yet there hasbeen progress in acknowledging and paying forthe global commons, mostly, but not exclusively,through international treaties.

The best known case is the GlobalEnvironmental Facility (GEF) created in 1991and funded mostly by voluntary contributionsfrom rich countries, with the purpose offinancing the provision of global commons.Furthermore, GEF is the designated financialmechanism for the international agreements onbiodiversity, climate change, protection of theozone layer, and persistent organics.

International treaties also create sources offinancing the provision of global commons thatneed not go through international entities. Forexample, trade in bioprospecting and on carbon

sequestration are the result of internationalregulations about biodiversity property rights(Convention on Biological Diversity) andcontrol of climate change (Climate ChangeConvention).

Beyond the limited resources currentlyavailable to finance the provision of the globalcommons, there is an ongoing internationaldiscussion that began in the early 1990sregarding what more should or could be done.Proposals to raise money to pay for the globalcommons include environment-related taxesand charges, such as a world carbon tax, aworld charge on the use of the ocean, an inter-national air transport tax, or an up-front tax forglobal commons conservation. As well,proposals have been made to earmark part ofnon-environmental-related world taxes. Themost debated thus far is the Tobin tax (a tax oninternational currency transactions, proposed bythe economist and Nobel laureate James Tobin).

• Available at what level? International.

• Mostly available to which type of developingcountry? All, but particularly those thatharbor an important piece of the globalcommons.


• Mostly used for which type of naturalresource? All but many agricultural areasmay not qualify.

• Mostly used with which type of projectparticipant? All landowners and land users.

(continued)




• Need for government facilitation: Low tomedium.


• Potential in terms of SNRM achievements:Low to high.

• Potential in terms of rural poverty allevia-tion: Low to high.


Where to go for the money: GEF funds arejointly managed by the World Bank (www.worldbank.org), UNDP (www.undp.org), andUNEP (www.unep.org). The World Bankoversees GEF grants for investment projectsand programs (which is where most of themoney is), UNDP oversees regional policydevelopment projects, and UNEP managesscientific projects. The best information source,including how to contact the GEF countries’reference office, is found on the GEF Web site(www.gefweb.org). Other financing opportuni-ties for SNRM projects associated with interna-tional treaties were mentioned earlier indescription card 13, and are also discussed inmore detail in chapter 2. Other internationalcharges and tax schemes are still in a concep-tual phase, but don’t discount them!

Where to go for country examples: Severalof the case studies described in the next chapterhad partial financing from GEF (e.g., theUganda Forest Conservation Trust Fund).Quintela et al (2002) discusses GEF-fundedprojects in Côte d’Ivoire, Burkina Faso,Romania, and others. The GEF Web sitementioned above will lead you to case-by-casedescriptions of all the projects in its portfolio.

Where to go for more information: Formoney that is currently available, information isfound in the sources mentioned above (particu-larly GEF and World Bank). For what is nothere yet but may be in the future the bestreference is the ongoing discussions on globalpublic goods fostered by the United Nations inthe late 1990s (search for the Zedillo report athttp://www.un.org/esa/ffd/a55-1000.pdf) andfor UNDP contributions see Faust et al. (2001)and Kaul et al. (1999). See also Bezanson andSagasti (2001) (downloadable from www.ids.ac.uk/ids).


The 12 case studies presented below offer briefillustrations of many of the financing optionsdiscussed in the previous chapters and thecontextual issues they raise. They have beenprepared for this survey by members of Danida’sWorking Group on Sustainable Financing, by theInternational Institute for Environment andDevelopment, and by WWF country offices. Table5 lists the projects, the financing issues that eachraises, and identifies the authors.

There are several ways to group and relate thesecase studies. Brazil, Bolivia, Ecuador, Namibia,Tanzania, and Zimbabwe may all be read as casesof financing through payments for environmentalservices (PES) schemes. Still there are manydifferences among them. Brazil's ICMS Ecológicoand the Ecuador and Zimbabwe cases are govern-

ment-led PES schemes. The Bolivia andZimbabwe cases are NGO-driven PES schemes.Namibia, and to a lesser extent Zimbabwe can beconsidered examples of markets for environ-mental services (MES). The South Africanoutgrower program is a case of financing throughpayments for environmental products. The twoSouth African cases and the Namibian case arealso examples of private businesses' partnershipwith communities and NGOs. Ecuador’s DPFAcase and Malawi are two small successes in thedifficult transitions from external donors’financing to participants’ self-financing. TheUganda Impenetrable Conservation Fund conveysthe lessons of Africa’s first conservation fund, andtogether with Bhutan shows the need and difficul-ties of multisource financing.


CHAPTER 6. CASE STUDIES OF F INANCING FOR SNRMby Camille Bann, Tom Blomley, Therese Brinkate, Lars Christensen, Maryanne Grieg-Gran, Søren Hastrup, AndreasJensen, Karsten Raae, and Chado Tenzin

1. Bhutan / Biological corridor Landscape Project

A strategy of financing diversification to support a complexconservation project encompassing 9 percent of thecountry’s territory. Financing from NGOs, bilateral aid,development aid agencies, foundations, and public budget.

Chado Tenzin / WWF-Bhutan

2. Bolivia/ Noel Kempff Climate Action Project

Payments for carbon sequestration. Financing from marketsfor carbon offsets, NGOs, nonlocal investors, public budget.

Summary by Camille Bann /IIED

3. Brazil / ICMS Ecológico

Payments for environmental services. Financing through theearmarking and distribution of state-level taxes.

Maryanne Grieg-Gran / IIED

4. Ecuador / DPFA (Andean ParticipativeForest Development Project)

Very poor communities are still willing to invest in SNRMproject. Financing from bilateral aid and household savingsand labor assets.

Lars Christensen / LC Consult /member of Danida WorkingGroup on Sustainable Financing

TABLE 5. LIST OF CASE STUDIES

Country / Project or program name Financing scheme or related issue of interest Author / Affiliation


5. Ecuador / Pimampiro program

Payments for watershed conservation. Financing fromwater charges.


6. Malawi / Community-based naturalresource management, LakeChilwa Wetland

The foreign financing ends and the local beneficiaries takeup the project. Financing from bilateral aid, public budget,and local not-for profit and for-profit sources.

Andreas Jensen / Danida

7. Namibia / The Torra Conservancy

Private sector–community partnership for tourismand safari.


8. South Africa /The Green Trust Fund

A NGO–private financing program. Therese Brinkate / WWF-SouthAfrica

9. South Africa / Outgrower schemes

Private sector–community partnership for wood production. Summary by Camille Bann /IIED

10. Tanzania / MEMA project

This case illustrates how an SNRM project branches out toa new initiative that requires new partners and newfinancing arrangements. Financing from bilateral andprivate investment by local and non-local businesses.

Karsten Raae / Danish ForestryExtension / member of DanidaWorking Group on SustainableFinancing

11. Uganda / Mgahinga and BwindiImpenetrable ForestConservation Trust

A prime ecosystem, many funding sources, many institu-tions, and a trust fund. Financing from NGOs, bilateral aid,GEF, and public budget.

Tom Blomley, CAREInternational

12. Zimbabwe / CAMPFIRE project

Community-based wildlife management. Financing fromNGOs, bilateral aid, and public budget.

Søren Hastrup / PFF Consult /member of Danida WorkingGroup on Sustainable Financing

TABLE 5. LIST OF CASE STUDIES (cont’d.)

Country / Project or program name Financing scheme or related issue of interest Author / Affiliation


This case illustrates a strategy of diversifyingfinancing to support a complex conservationproject encompassing 9 percent of the country’sterritory.

Background

Bhutan is a small and sparsely populated—658,000 people in 2000—country with a traditionof small-scale agriculture in the relatively fewareas of good agricultural soils. As of 2000 some7 percent of the territory is cultivated. Thecommunities in the alpine region are mostlyherders, while the communities in the temperateand subtropical regions are farmers although theyalso own a few heads of animals. Bhutan issituated at the convergence of the Palearctic andthe Indo-Malayan biogeographical areas thattogether create a varied geography with altitudesranging from 150 meters in the southern foothillsto over 7,000 meters in the north with annualrains varying from 500 mm in the north to over5,000 mm in the south. These contrasts nurture arich and unique biodiversity.

During the 1990s WWF-Bhutan was an importantstakeholder in facilitating sweeping changes inthe country’s natural resource management.These included the devolution of natural resourcemanagement rights to local communities, and theestablishment of a comprehensive system ofprotected areas and biological corridors that as of2003 encompassed 35 percent of the country’sterritory. WWF also helped in putting in placethe world’s first Environmental Trust Fund in1992. The other contributors were the RoyalBhutan Government, GEF, UNDP, Denmark,Finland, the Netherlands, Norway, andSwitzerland. The fund's capital is 20 milliondollars and in recent years it has financedbetween 15 and 19 SNRM projects a year for anannual total of approximately 1.3 million dollars

(see detailed information about the fund at www.bhutantrustfund.org).

Biological corridors are the new addition toBhutan's protected areas system. They weredesignated in 1999 as "Gifts to the Earth" fromthe people of Bhutan under WWF’s People andPlants campaign program. The biologicalcorridors comprise 9 percent of the country'sland area and are spread throughout the countryto connect protected areas, allowing the flow ofgenes between otherwise isolated populations ofplants and animals and ensuring the continuedsurvival and evolution of Bhutan’s unique biolog-ical resources. Over 70,000 people, most of themsubsistence farmers, reside in and around theBCLP. They graze their cattle in the nearby forest,extract timber for construction and roofing andfuelwood and for cooking and heating. They alsocollect non-wood forest products such asmushrooms, canes, and medicinal herbs.

Financial arrangements

The sustainable management of the biologicalcorridors encompasses an array of different activi-ties, from basic research to protected areasmanagement plans, to community-based inte-grated conservation and development programsin the areas near the corridors. All of theserequire financing. Early on, Bhutan’s governmentand WWF-Bhutan realized that it was necessaryto look for a variety of funding sources, since thesheer magnitude of the project’s financial needsmade it improbable to derive them from a singlesource, and also because a multisource financingstrategy would allow a better match between aspecific subproject and the would-be funder priori-ties. Progress as of early 2003 included thefollowing:

Case study 1. Bhutan—Biological Corridor Landscape Project (BCLP)Reported by Chado Tenzin / WWF-Bhutan


• The Field Museum of Chicago, theMacArthur Foundation, and WWF-Bhutan arefinancing biological research in the corridors.Two rounds of joint surveys have beencarried out, in 2001 and 2002. When theresearch program is completed all of theequipment and other facilities purchased withthe MacArthur Foundation money will betransferred to the Bhutanese Government.

• The GEF medium-sized project grantprogram (MSP) will finance the five-year"LINKPA—Linking Protected Areas Project"to prepare corridor management plans begin-ning in March 2003. Bhutan’s NatureConservation Division of the Ministry ofAgriculture and WWF-Bhutan will be incharge of this project.

• WWF developed a three-year proposal forcrafting a management plan for SaktenWildlife Sanctuary and its BiologicalCorridors (SWS-BC). The MacArthurFoundation will support surveys—ecological,wildlife, and socioeconomic—to generateinformation for drafting the managementplan. The MacArthur grant will also supportcapacity development of the park staff and thelocal authorities and establish basic infra-structure network so that the park staff canstart implementation of the management plan.

• The Netherlands is financing an 18-monthpilot Integrated Conservation andDevelopment Project (ICDP) that is beingcarried out by the government and WWF-Bhutan. The project will focus on three sites


Terraced slopes in valley near Punakha, Bhutan

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within or adjacent to the corridors. It isexpected that the experience from the pilotproject will be scaled up into a larger five-yearproject.

• The pilot ICDP will focus on community-centered activities. Some of the commonactivities for the sites are protecting drinkingwater sources; greenhouses on pilot scale;creating plantations of multipurpose trees indegraded areas; intensifying agriculture andlivestock production through improved seedsand breeds; developing pasture to checkcattle migration and grazing in the wild;installing improved stoves to reduce fuelwoodconsumption; supplying corrugated metalsheets for replacing shingles in roofinghouses; cash-earning activities (supplyingbillets for mushroom cultivation, supplyingpullets for backyard poultry, and promotingtraditional crafts); supplying solar panels forlighting; starting nonformal education; andconducting training and workshops toeducate the communities in sustaining theproject activities.

• The Bhutanese Government, WWF, andUNDP have partnered for a 1.8 million-dollarproject to manage several of the corridorswith the twin objectives of nature conserva-tion and poverty reduction. Funds for thisproject came from WWF, Bhutan's govern-ment, and GEF.

Project lessons

Although more needs to be done to supportBhutan’s protected areas system and to enhancethe livelihood of the neighboring rural commin-utes, what has been accomplished bearstestimony to the country's positive context forSNRM, including:

• The government’s policies and legislationstrongly support conservation efforts, and the

conservation programs make up part of thecountry’s economic and social developmentgoals.

• The government is strong and stable, anddevelopment partners are confident thatplanned activities will get implemented.Further, the bureaucracy is relatively smalland the government's financial managementis efficient and transparent.

• Bhutan is willing to explore new and innova-tive political, socioeconomic, and environ-mental development mechanisms—forexample, the devolution of power from thethrone to the people. Bhutan also started thefirst Environment Trust Fund, devoted to thelong-term financing of conservation efforts.

• Foreign development agencies and NGOsshare a positive view of Bhutan’s commitmentto conservation and social development.

• WWF has a strong relationship with theBhutan's royal government, and is seen as areliable development partner with no hiddenagenda.

A lesson for both the Bhutan government andWWF-Bhutan is that in a world of increasingcompetition for conservation and development,funding the conventional approach, "one project,one donor" does not work, particularly for conser-vation projects that lack immediate tangibleoutputs. The alternative is to develop a clearunderstanding of the macro-program, and thenlook for different funders for each component.

Additional references and contacts

For further information visit WWF-Bhutan's Website at www.wwfbhutan.org.bt or contact theauthor of this case study, Chadho Tenzin, [email protected].


This project illustrates payment for carbonsequestration services.

Background

The Noel Kempff Mercado Climate Action Project(NKMCAP) in Bolivia was established in the1990s as part of the United States Initiative onJoint Implementation (USIJI) pilot phase. Theproject aims to promote carbon sequestration,biodiversity enhancement, and local benefits. Itseeks to avoid carbon emissions through forestconservation, the monitoring of indemnifiedlogging companies,26 and community assistance insustainable agriculture and forest management.The project includes a forestry program and acommunity development program. TheNKMCAP has been at the center of internationaldebate on whether to include certain land useactivities in international climate agreements.However, in light of the March 2001 U.S. with-drawal from the Kyoto Protocol and the exclusionof avoided deforestation from the CDM, the initialenthusiasm has waned somewhat.

The Noel Kempff Mercado Park has almostdoubled in size since the inception of the projectand now comprises 1,523,446 hectares of diverselowland and upland forests. By avoiding andreducing greenhouse gas emissions from loggingand agriculture it is expected to lock-in up to 7million metric tonnes of carbon (t/C) over 30years at a cost of US$1.00 t/C. It is also arguedthat the project will contribute to a reduction inthe pace of deforestation in this frontier area.The project developed an offset-sharing systemthat provides 49 percent of the offset credits tothe Government of Bolivia, 49 percent to theindustry contributors, and 2 percent to American

Electric Power (AEP), the lead investor, as aproject development "bonus." The government isrequired by contract to spend the proceeds fromthe sale of offset credits on park managementactivities in Noel Kempff and throughout Bolivia,and on other biodiversity preservation activities.The environmental benefits associated with theproject therefore appear to be encouraging.


There have been many actors involved in thedevelopment of the project including privatesector investors, international and local NGOs,local government, and communities. The NatureConservancy and a consortium of companiesincluding AEP, with the Bolivian government,acquired logging concessions, in order to reducedeforestation, thereby reducing carbon emissions.The project provides funds and support to theJoint Implementation (JI) Office in Bolivia, andthe park administration is financed through anendowment fund administered by the NatureConservancy.

As part of the project, in 1998 an incentive creditand rotational fund was established to give creditsto community members who undertook changesin land use practices and activities that reducedcarbon emissions. These included the planting ofeconomically useful palm species, agroforestrymodel farming, substitution of beef cattle withdairy cows, and ecotourism and small businessinitiatives. The average amount of credit providedwas under US$200. The uptake was poor and thesense of indebtedness large at the end of theproject cycle. Reasons for this include a lack ofcapacity, a lack of understanding of the repaymentsystem, and a lack of enforcement for repayment.The organization of the credit committee and themanagement of funds proved difficult withcorruption occurring in at least one of the


Case study 2. Bolivia—Noel Kempff Climate Action ProjectSummarized by Camille Bann / IIED from works by P. May, E. Boyd, F. Vega and M. Chang

26 Indemnified logging companies are those that receive compensation for prac-ticing sustainable forest management.


communities. When the loans were exhausted itwas expected that carbon credits would helpsupport the Park and provide financial assistanceto the communities to avoid carbon leakageeffects. However, the issue of direct credit distri-bution at the community level was not consideredin the formal project design.

The adoption of more sustainable agriculturalpractices was poor due to limited technologytransfer and a limited understanding of theconcepts of leakage and conservation.Communities felt that the changes introducedwere not compatible with local practices, and thusgave them a low priority. For example, theincome generated by small-scale production ofdiary products or hens was not generally consid-ered sufficient, and people expressed a need togenerate income from "real activities" such asforestry, fishing, and tourism.

In hindsight it is possible to conclude that theprovision of cash incentives was not the bestchoice given that the community functionsthrough a barter and trade system of goods andservices. Besides the fundamental problem of

introducing credit into a barter economy, theincentives were focused on agricultural activitiesthat affected the poorest members, yet the richercommunity members, who could take largerloans, chose to invest in activities unrelated toagriculture, such as shops and bakeries. Otherreasons for the lack of success included highrates of loan default; limited employment genera-tion alternatives; limited uptake of technologytransfer; perception that the project caused jobloss by removing timber activity; loss of financialresources due to an agreed period of fishing banto allow for the preparation of a fish managementplan; deterioration of roads formerly maintainedby logging companies, which led to increasedtransport expenses; and the lack of enforcementof penalties.

Project lessons

• The project design was not sufficiently clearand inclusive of local partners. A clear set ofguidelines for evaluating the social impacts ofcarbon projects needs to be devised oradapted to the specific context by communi-ties and the national government.


Mahogany trees floated by bolivian woodcutters on lower Rio Heath. Bolivia

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• The case study illustrates that multiple-levelprojects might encounter barriers owing tothe complexity of bringing together themultiple interests of investors, governments,and NGOs.

• The project had unclear carbon, conservation,and development links. Clarification of howactivities will contribute to carbon sequestra-tion was needed. These activities shouldrepresent realistic opportunities for communi-ties and be based on in-depth knowledge ofthe community livelihood strategies.

• The rights and responsibilities of the commu-nities in relation to the rules established by

park authorities and the project were not clear.In terms of the community it is recommendedthat local rules and dynamics be incorporatedinto project activities and clear rules beconveyed using information and awareness-raising through community outreach.


For further information read the 2003 report,"Local Sustainable Development Effects ofCarbon Sequestration Projects in Brazil andBolivia: A View from the Field," available at www.iied.org. One of the paper's authors, Peter May,may be contacted at [email protected].


This case illustrates a payment for environmentalservices scheme based on the distribution of apercentage of states’ sales tax.

Background

The ICMS Ecológico is a tax revenue–sharingscheme between different levels of government inBrazil,27 designed to promote the conservationand management of protected areas. The ICMS(which stands for tax on circulation of goods andservices) operates at the state level in Brazil andis an important source of revenue for localgovernments. The Federal Constitution of 1988stipulates that 25 percent of the revenue raised bythe ICMS should be allocated by the state govern-ment to the local governments. A further require-ment of the Constitution is that 75 percent of thetotal passed on to local governments should beallocated according to the amount of value-addedgenerated by each county. The state govern-ments have the authority to set distributioncriteria for the remaining 25 percent. Typically,

the state governments have used criteria basedon population, geographical area, and primaryproduction. In 1992, the state of Paraná intro-duced an ecological criterion based on the area ofland subject to protection. This was in responseto pressure exerted by the mayors of certaincounties that had large protected areas andwatershed protection areas within their territo-ries. They argued that they were losing out onthe allocation of the ICMS revenue since so muchof it depended on the amount of value-addedgenerated and their counties were hampered byland use restrictions that limited the scope fordeveloping activities and generating value-added.

The new system in Paraná became popularlyknown as the ICMS Ecológico. Other statesobserved Paraná’s experience with this newapproach and decided to introduce similarsystems. By 1997, three more states—Rondonia,Minas Gerais, and São Paulo—had introduced theICMS Ecológico. At this time WWF-Brazil begana campaign to promote the benefits of theprogram to other states. By 2002, another sevenstates had adopted this approach.

Case study 3. Brazil—The ICMS EcológicoReported by Maryanne Grieg-Gran / IIED

27 Brazil has 26 states, each with revenue-raising powers.



While the major motivating factor for the intro-duction of the ICMS Ecológico was the need tocompensate counties subject to land use restric-tions, it was envisaged that it could also act as anincentive for increasing the area of land set asidefor protection and improving its management.

The share of ICMS revenue for each county iscalculated by a consolidated index, which adds upthe scores of that county for each criterion, withthe relevant weight applied. The ecological indexfor each county is based on the total area setaside for protection in relation to the total area ofthe county. To be included in the calculation ofthe index the protected areas have to be regis-tered and legally defined. Protected areas can bedesignated at federal, state, or county level. Thisis important since federal and state governmentshad previously designated the majority ofprotected areas and until ICMS local authoritieshad no strong incentives to do so. In Rondonia,for example, as much as 36 percent of the landarea was subject to some sort of protection in1997—and only 0.01 percent of this protected areahad been designated by local governments.

In most of the states that have implemented theICMS Ecológico the emphasis in revenue alloca-tion is on the amount of protected land area.Some states such as Minas Gerais take intoaccount the degree of land use restriction byusing weighting factors. Paraná has gone furtherand introduced a system for evaluating the qualityof management of protected areas. Thisaddresses concerns expressed in the initial yearsof the scheme about a proliferation of "paper"parks. The assessment of management qualityaffects the overall score/ecological index for thecounty and, if necessary, protected areas that arenot being adequately managed can be disqualifiedand removed from the register. Various types ofprotected areas qualify: those that involve indirectuse or have considerable land use restrictions

(e.g., biological reserves, ecological stations, andparks) as well as those involving direct use (suchas indigenous areas, extractive reserves, andsustainably managed forests). In some statessuch as Minas Gerais, the latter categories aregiven lower weight in the calculation of the indexto reflect the extent of land use restriction. Thusan ecological research station has a weightingfactor of 1 while an indigenous reserve has afactor of 0.5. Privately owned protected areas alsoqualify although any ICMS revenue associatedwith them accrues to the local government andnot to the owner of the land.

Project lessons

Early evaluations of the ICMS Ecológico empha-sized the impact on attitudes and environmentalawareness. Instead of regarding protected areasas an obstacle to development, local governmentswere starting to see them as an opportunity toraise revenue (Grieg-Gran 2000).

Later evaluations have been able to examinetrends in the area designated for protection. InParaná the area subject to protection grew by 165percent between 1992 and 2000 (May et al. 2002).In Minas Gerais there was an increase of 65.4percent in the first five years of the program, butsome of this can be attributed to efforts made bymunicipalities to formalize conservation areasthat had not been legally registered.

In both states, and particularly in Paraná, therehas been a large increase in the amount of area ofprivate land designated for protection, reflectingefforts made by the state governments topromote this approach through formal recogni-tion in the legislation and more general promotionactivities (May et al. 2002).

However, there has been little assessment thatgoes beyond statistics to look more in depth atthe impact on biodiversity in protected areas.WWF-Brazil is promoting the idea of more


systematic monitoring of the impact of the ICMSEcológico, starting in two pilot states.

While the ICMS Ecológico was introduced tocompensate municipalities for the loss of taxrevenue from the use of land for conservation, itseems likely that it would also have a positivesocial impact. However, this tax is not an addi-tional revenue; it is merely a redistribution of taxresulting from a change in allocation criteria. Theinclusion of a new criterion implies that the weightgiven to one or several previously existingcriterion have to be reduced. The net effect ofthese changes may favorably or unfavorably affectthe poorest countries. An evaluation of thescheme (Grieg-Gran 2000) found that 40 percentof the counties with protected areas in Rondoniawere worse-off in terms of tax revenue after theintroduction of the ICMS Ecológico. The evalua-tion also found that the counties that lost out fromthe introduction of the ICMS Ecológico tended tobe the poorer ones. As a group, the counties thatdid not benefit from the program had a lower level

of value-added per capita prior to its introductionthan the counties that benefited from it. Somecounties with very large proportions of theirterritory set aside for conservation, however,experienced dramatic increases in revenue afterthe introduction of the ICMS Ecológico. In thestate of Minas Gerais, the county of Marlieriaexperienced an increase in its share of ICMSrevenues over 2,000 percent between 1995 and1998 (Grieg-Gran 2000). In Paraná, the county ofSão Jorge do Patrocinio, which has 52 percent ofits territory dedicated to conservation, derived17.6 percent of its budget from the ICMSEcológico in 1998 (May et al. 2002).

Much depends also on how the local govern-ments use any additional revenue generated andthe extent to which this expenditure favors thecommunities most closely involved with theconservation units. Paraná provides both positiveand negative examples. In the faxinais (commonproperty forest resources), efforts have beenmade to use the money to improve the living


Iguaçu National Park - Iguaçu Falls Atlantic Rainforest Paraná, Brazil

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standards of the communities concerned throughexpenditure on health and education services androad maintenance. In counties where many of thenew protected areas have been created by privatelandowners, the attempt by local authorities tocreate incentives such as drainage improvementand road maintenance and access improvementhas led to complaints that public money is beingused to benefit just a few large landowners (Mayet al. 2002).

Future of the program

There is concern in Brazil that as governmentsset the revenue-sharing criteria, the system mayfall victim to changes in political prioritiesfollowing a change in government. More specifi-cally, counties cannot know exactly how muchthey will receive as a result of creating aprotected area since their benefit depends partlyon what the other counties in the state are doingand the extent to which they are also creatingadditional protected areas. From the outset therehas been concern that the incentive effect of theICMS Ecológico will become diluted as numerouslocal governments respond to it and designatemore conservation areas. Some counties—forexample, Alto Caparão in Minas Gerais—haveseen their ICMS Ecológico transfers decline overtime because of actions taken by other localgovernments (May et al. 2002).

From a project developer's point of view, theICMS Ecológico is not an ideal mechanism tofund specific conservation projects directly or intheir initial stages. This is because local govern-ments are not obliged to spend the revenuegenerated by the ICMS Ecológico on conserva-tion activities—although the state of Paraná hasentered into agreements for this purpose withsome counties. Nor can the local authoritiesestimate with any great certainty how much theywill receive as a result of a specific conservationaction. Their share of the ICMS Ecológicotransfers depends both on the actions taken by

other local governments and on the amount of taxrevenue collected across the state. But the ICMSEcológico does have the advantage of stimulatingpolitical support at the local level for conserva-tion. It can also strengthen community supportfor conservation areas where the revenuegenerated is perceived as being used by localgovernments for activities beneficial to them(May et al. 2002). The ICMS Ecológico shouldtherefore be seen as a complement to other moredirect sources of funding.

The program has developed in a specific politicalcontext, a federal country where subnationalgovernments have revenue-raising powers and aconstitutional requirement to share certain typesof tax revenue with lower levels of government.However, most countries, whether they have afederal government or not, have systems for fiscaltransfer between central and local governmentsoften involving complex criteria and formulas forallocation. With the increasing emphasis onpolitical decentralization and the decentralizationof natural resource management, there is signifi-cant potential for adopting approaches that aresimilar to the ICMS Ecológico in other countries.


For further information, consult M. Grieg-Gran,2000, "Fiscal incentives for biodiversity conserva-tion: The ICMS Ecológico in Brazil." DiscussionPaper No. 00-01, IIED, London; or P. May, F. VeigaNeto, V. Denardin, and W. Loureiro, 2002, "UsingFiscal Instruments to Encourage Conservation:Municipal Responses to the 'Ecological' Value-added Tax in Paraná and Minas Gerais, Brazil."In S. Pagiola, J. Bishop, and N. Landell-Mills(eds.), "Selling Forest Environmental ServicesMarket-Based Mechanisms for Conservation andDevelopment." London: Earthscan. MaryanneGrieg-Gran may be contacted at [email protected].


This case illustrates local investment in SNRMmade possible by low opportunity costs of laborand a strong community organization that isresponsible for an equitable distribution of in-kindbenefits and revenues.

Background

From 1992 to 1995 FAO ran the AndeanParticipatory Development Project (DFPA) infour South American countries—Colombia,Ecuador, Peru, and Bolivia. The project estab-lished national programs and tested participatoryrural development approaches to rural extensionservices, agroforestry, community forestry, andsmall-scale forest-based enterprises. DFPA’s aimwas to empower the local community to identifyits own measures of wealth and success-indicatorsand prepare natural resource management plansthat reflected those community goals and values.Several of these plans were community forestmanagement plans, where local resources werethe main input to the project. This case studydescribes one such plan developed by theChauzán San Alfonso community in Ecuador.

Chauzán San Alfonso is an indigenous communityof some 100 families with a strong culturalidentity. The community has a highly organized,democratic system. People are self-reliant andtraditional forms of sharing labor throughcommon work-days and "labor-lending"(minga,prestamano) are common. The mountain envi-ronment (slope, soil, wind, altitude) offersmoderate to extremely difficult conditions forrural production. The local economy is based insubsistence agriculture with limited surplusesavailable for sale. Arable land is scarce. Only 15percent of the families have holdings of morethan 10 hectares. Another 60 percent have 1–10hectares, and a quarter of the households have

little or no land. The principal economic activitiesare agriculture and livestock (grazing). Gas orfuelwood is used for cooking; the latter iscollected, mainly by the poorer families from thecommunal forest.

In late 1993 DFPA helped the Chauzán San Alfonsopeople to prepare a community forest plan. As partof this exercise the community identified its priori-ties including, in descending order: improving agri-cultural production for self-consumption;reclaiming more agricultural land; improving theecology of the community lands; creating morework opportunities within the community;improving health conditions; improving educa-tional opportunities; increasing income; andstrengthening the community organization.

Consistent with the above priorities thecommunity developed a forest management planfor the 83 hectares of communal forests, andbegan applying it in 1994. The management plancalled for converting the best part of the forest—some 44 hectares—to a silvipastoral system, ofpine cypresses and pastures. The plantationwould create new work opportunities for thelandless households and deliver pasture,fuelwood, improved ecological conditions, andincreased incomes to the community. The forestplan employs a 30-year rotation scheme in twosections of the 44 hectares.


The first stage of the DFPA project, the develop-ment of the community-based management plans,was made possible by a grant from the Dutchgovernment and administered by FAO. Theactual implementation of the plan, however, is acommunity financed initiative. To this end aCommunity Forest Management Fund was estab-


Case study 4. Ecuador—Participative Forest Development in the Andes (DFPA)Reported by Lars Christensen / LC Consult / member of Danida’s WGSF


lished within the existing community organiza-tional structures, since members were accus-tomed to managing and distributing commonearnings.

To manage the plantation, labor is hired fromamong local landless families for whom the

offered salaries compare favorably with theirdaily income, making the arrangement attractiveto both parties. Under this condition externalevaluators have estimated an annual internal rateof return of 16 percent for a complete forestrotation cycle.

Through the Community Forest ManagementFund the community distributes the revenues andbenefits of the plantation as follows: (a) locallaborers working in the plantation are paid; (b)plantation related expenses such as replanting arecovered; (c) 10 percent of the annual profit isreserved for unforeseen expenses; (d) the net

profit (revenues minus the first three items onthis list) is distributed equally among thecommunity households; and (e) use of theimproved pasture in the silvicultural system aswell as the other lands outside the plantation areannually apportioned among the community’shouseholds.


A group of men are helping build a new roof for a community house. Mataje, Awa Reserve. Awa Ethnic Forest Territory, Ecuador

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Project lessons

The approach developed by DFPA ensured thatthe project responded to the community prioritiesand took into account the local socioeconomiccontext. This in turn made it possible to mobilizelocal investment and establish a plan for the long-term sustainable management of the naturalresources in question anchored in the localcommunity. As seen in the above analysis theentire community benefits from the managementof the common natural resource. Some of themore specific lessons are summarized below:

• The presence of a strong community organi-zation capable of managing investments aswell as securing equal distribution of benefitsis essential.

• The approach requires external technicalassistance in the initial phase in order tosupport the community in developing andstarting the management activities. Thiscould impede replication where no funds forinitial investments in technical assistance areavailable. On the other hand, the technicalassistance costs are low.

• The case illustrates the importance ofincluding an analysis of the local context. Inthis case the economic viability of the plan is

tied to the opportunity cost of the landlesshouseholds' labor. Incidentally, this fact mayalso work as a project liability, in that a signif-icant increase in the income-earning opportu-nities available to the local landlesselsewhere may jeopardize the plantation’seconomic viability.

• This methodology of participatory ruraldevelopment planning could be replicatedanywhere. However, whether that would leadto cases of sustainable financing of naturalresource management depends very much onthe local situation. In general, the potentialwould be significant in situations where thetwo key conditions are present: low opportu-nity costs of local resources and humanpowerwithin the community, and a strong demo-cratic tradition in the community.


For more information on this project you maywant to read "Proyecto FAO-Holanda, DesarrolloForestal Participativo en los Andes," DFPA, 1994.You may also contact Charles B. Kenny-Jordan(former Chief Technical Adviser of DFPA) [email protected]; FAO's representation inEcuador ([email protected]\or\) and LarsChristensen ([email protected]).



This case illustrates a municipal system ofpayments for watershed conservation.

Background

The town of Pimampiro is located in the munici-pality of San Pedro de Pimampiro, Imbaburaprovince, Ecuador. The town is situated in thePisque River watershed and the Palaurco Riversub-watershed. The Palaurco River is used forirrigation and drinking. Approximately 25percent of the population has limited access todrinking water, which is of poor quality becauseof agricultural discharge upstream. Despite thelack of detailed hydrological information, thecommon perception is that the forests ensurewater quality and flow, particularly in the dryseason.


Under a pioneering pilot project for Ecuador,landowners in Pimampiro are being paid tomanage the forest in the watershed in order toprotect water sources. Many actors are involvedin this initiative, among them: AsociaciónAutónoma de Agricultura y Ganadería NuevaAmérica (Nueva America Agriculture andLivestock Autonomous Association), whichconsists of 24 members, with property titlesadding up to approximately 638 hectares of land,who are supplying the environmental service;Desarrollo Forestal Comunitario (DFC), an FAO-funded project for community forest management;CEDERENA (Ecological Corporation forRenewable Natural Resource Development), anNGO that evolved out of DFC; the Inter-AmericanFoundation (IAF), a U.S. funding organization;and the municipality of Pimampiro.

In 1999, CEDERENA signed an agreement withthe municipality to work on an IAF-funded

project, "Sustainable Management of RenewableNatural Resources of the Pimampiro District forthe Maintenance of Quantity and Quality ofWater." As part of this project the UMAT(Pimampiro’s Environment and Tourism Unit—part of the town’s governmental structure) intro-duced an environmental payment system thatprovided incentives for forest conservation. Thispilot scheme was implemented in Nueva Americawhere 20 members of the Nueva AmericaAssociation are receiving payments for environ-mental services.

In 2001 the municipality approved a newordinance that established a Water Regulation forthe Payment of Environmental Services fromForest and Paramo Conservation, which becamepart of UMAT’s responsibilities. A fund wascreated under this ordinance to channel paymentsby beneficiaries (domestic water users) to thoseinvesting in the continuous supply and quality ofwater through the maintenance of forest cover.The fund had an initial endowment of US$15,000and it was expected to receive US$500 a monthfrom a charge placed on drinking water fees.

The fund is managed by a committee composedof representatives from the municipality andCEDERENA. The committee verifies propertytitles, measures and inspects the holding, andthen determines the amount that should be paidto each landholding family. Monthly paymentsrange from US$0.50 to $1.00 per hectaredepending on land category. These payments area result of political negotiation rather than atechnical analysis of the hydrology, watervaluation, or financial planning of the fund. Thepayment amounts could increase as the marketfor watershed services is developed and moreresources are generated. To receive paymenteach member of the association must sign anagreement with the municipality.


Case study 5. Ecuador—Pimampiro payments for watershed services schemeSummarized by Camille Bann / IIED from works by M. Echeverria, J. Vogel, M. Alban, and F. Meneses

Project lessons

From the demand side there are concerns aboutthe sustainability of the fund. The IAF fundingended in 2002 and it is not clear what will happento the payment scheme. Because as of 2002 only60 percent of water sold was paid for, the munici-pality does not provide the agreed-upon amountto the fund. In 2002 collection of the water taxamounted to approximately US$ 200 per month (alow amount compared with the originallyestimated US$ 500 per month) and does not coverthe payments for watershed services, which by2002 amounted to US$ 455 per month.Furthermore, in order to protect all of the watersources (covering an area of 4,200 hectares), thepayments would need to be around US$ 4,000 permonth, far beyond the scheme’s reach.Participation of the irrigation system’s userswould be vital to expand the scheme; however,this participation is not being pursued. There isalso the possibility of involving agriculturalproducers through the property tax collected bythe municipality. The lack of hydrological datademonstrating the hydrological benefits linked toforest cover further hampers the developmentand sustainability of the market.

From the supply side, a household survey hasbeen undertaken in order to evaluate the socialimpacts of the compensation mechanism. Thereliability of this survey is uncertain, however,

owing to concerns that respondents may haveanswered strategically. The survey showed thatpayments contributed to family income andmotivated participation in the scheme. Paymentsare commonly used to meet short-term needs(such as food, gas, and school fees). However, thepayment scheme does not meet expectations—heads of households feel they should be paidmore to protect the forest. The payment systemhas not strengthened the level of organizationwithin the recipients. Association and transactioncosts are high—conservatively estimated at threetimes the amount actually paid to farmers in thefirst year of the project. Payments have improvedenvironmental awareness among recipients.However, CEDERENA believes that support forconservation is still underdeveloped and thatpeople intend to change their land use in thefuture. It is also clear that sanctions are required,as violations such as slash-and-burn forest degra-dation and unauthorized wood extraction arecommon.


For further information, read Ecodecision, 2002,"Impact Assessment of Watershed EnvironmentalServices: Emerging Lessons from Pimampiro andCuenca in Ecuador." IIED, London. MartaEcheverría can be contacted at [email protected].



This case illustrates the phasing-out of an SNRMproject’s external financing, and its successfuladoption by the local stakeholders.

Background

The long-term objective of this project was toensure that the natural resources of the LakeChilwa wetland and its catchment area wereutilized and managed by local communities in asustainable manner. With this long-term objectivein mind, the project focused on empowering localcommunities to conserve and manage theirnatural resources through institutional capacitybuilding and coordinated technical support byline ministries in the Zomba, Machinga, andPhalombe districts.

By the end of the first phase the project's achieve-ments included the following:

• Three environmental district offices (EDOs)were established in the Machinga, Phalombe,and Zomba districts.

• Three district development committees(DESCs) were established in the above threedistricts and 45 members were trained.

• Twenty-three studies on wetland issues wereconducted by consultants in preparation ofthe Wetland’s State of the EnvironmentReport.

• Five hundred copies of the Wetland’s State ofthe Environment Report were produced anddistributed.


Case study 6. Malawi—Lake Chilwa Wetland ProjectReported by Andreas Jensen / Danida (based on project completion report by Daimon Kambewa)

Fisherman at Msaka fishing camp at Chimpamba Village, spreading his catch of fish to dry in the sun Malawi.

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• A Wetland Management Plan was approvedby riparian district assemblies.

• Forty-one awareness sessions, using a localband, a local drama group, and an NGO wereconducted; these resulted in the establish-ment of 43 community working groups in thethree districts combined. (Communityworking groups are a crucial part of themanagement plan since they are supposed toprepare and implement action plans.)

• Four hundred and fifty copies of the districts'State of the Environment Reports (DSOERs)and Environmental Action Plans (DEAPs)were produced and distributed (150 perdistrict).

• Ten micro-project activities were imple-mented in 46 villages.

• A communication strategy was produced.This allowed the project to promote wise usethrough TV, a video documentary, newspa-pers, preaching manuals, radio programs, andproject flyers.

• Sixteen bird breeding areas were establishedas sanctuaries respected by the local people.

• Forty-three Beach Village Committees weresupported and trained.

• Two training manuals on community workinggroups were produced, packed, and distrib-uted as a toolkit for 25 frontline staff to usewhen forming and training community-working groups.

• Staff from two EDOs attended a trainingsession in Denmark in Integrated WaterManagement.

• Twenty-three journalists from print and elec-tronic media were trained in investigativereporting, which resulted in more newscoverage on environmental issues in Malawi.

• Seven Ramsar signposts were erected in all ofthe three districts around Lake Chilwa.

• A Lake Chilwa Inter-District ManagementCommittee was established with a fully oper-ating secretariat.


Lakeside village on the shores of Lake Malawi.

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The project was funded by a Danida grant of 10.5million DKK during a first phase of 36 months(October 1998 through September 2001). Asecond phase was anticipated, but neverexecuted, because Denmark ceased developmentaid to Malawi in 2002.

As Danida support came to an end there was aconcern about the sustainability of the program interms of country ownership (that is, whether thecountry and particularly the local stakeholderswere interested in using the project products) andfinancing (that is, whether they had the resourcesto pay for them). Two years after the projectended, reports from Zomba, Malawi indicate thefollowing:

• Some project activities such as developingDSOERs and DEAPs were deemed sustain-able because there were institutions thatwould continue to produce them. In thisregard the District EnvironmentalSubcommittee of DESC was viewed as theappropriate responsible body that could leadthe process of developing and implementingdistrict plans on natural resource manage-ment. DESC members in the three districtshave received training in the planningprocess and as a result they have been able todevelop DSOERs and DEAPs in theirdistricts.

• Another institution that will sustain projectactivities is the Lake Chilwa Inter-DistrictManagement Committee for the threedistricts of Zomba, Machinga, and Phalombe.This body was expected to be a custodian ofthe wetland and ensure coordination and jointplanning among the three districtssurrounding the lake. However, the districtswere not be able to financially support thesecretariat for the Inter-District ManagementCommittee because they themselves werestruggling financially. Fortunately MBERU (a

department of the local university) offered tosupport the secretariat until the districts wereable to do so on their own.

• Local CBNRM committees established forbird catching and fisheries survived on theirown. They have the support of the traditionalleadership and generate small revenues fromfines and licenses. The input required fortheir operation is minimal (books, ledgers,pencils, and expenses for meetings) and inview of the economic value of the LakeChilwa fisheries there should be room formore support from the artisan fisheriesindustry (fisheries annual average yield of11.000 tonnes, with an estimated value of US$11 million per year). Bird catching results insignificantly more profits (1.2 million birdstrapped and shot, with an estimated value of aquarter-million U.S. dollars). In spite of thepositive outcome it is also evident that therelatively quick phase-out of Danida’s assis-tance exposed weaknesses in many of themanagement structures that were solelydependent on foreign aid.

Project lessons

• The key context condition that helped theproject to achieve community-based naturalresource management on the ground within arelatively short period of time was the closelinkages with traditional authorities combinedwith a very active media campaign to reachall villages in the catchment area. In addition,earlier work by the Fisheries Department andGermany's Gesellschaft für TechnischeZusammenarbeit (GTZ) laid a strong founda-tion for promoting CBNRM among the lakecommunities. A general move toward decen-tralization and empowerment of local govern-ment in Malawi aided in the achievement.

• A Wetland Management Plan will not achieveanything alone. Local ownership of theprocess of preparing the plan is extremelyimportant to ensure its implementation—


especially when foreign assistance pulls outbefore the implementation of the preparedmanagement plan, as happened with thisproject.

• Economic benefits of management interven-tions should be very tangible, both locally aswell as on a large scale and they should becommunicated to all stakeholders.

• Active participation of resource user groupsis the key to success (for instance, organizedas beach village committees, bird committees,etc.).

• Using the communication element as astrategic tool to support the project and stake-holders’ dialogue is critical.

• Linking all communities, traditional authori-ties, district assemblies, and national institu-tions is an exercise that is almost impossibleto complete on a full-scale basis. Systematicplanning should promote prioritization atdifferent levels and enable interventions to beimplemented in selected "hot spot" areas.

• Most development agencies—be they govern-mental institutions, nongovernmental organi-zations, or private firms—lack the requisiteskills to plan, implement, and monitor micro-projects targeting natural resource manage-ment with communities. Therefore localinstitutions should handle micro-projectsinstead.

• Environmental planning should be main-streamed locally as an integral part of thedecentralization process, that is, DSOERshould be part of the District Socioeconomicprofile and DEAP part of the DistrictDevelopment Plan.

• DSOERs and DEAPs should ultimately includean analysis of economic values compared tomanagement costs for various sectors.

• Duration of similar CBNRM projects shouldbe longer than three years to allow fullassimilation of the CBNRM processes by

district assemblies, traditional authorities,and the like.

• As it happens in other cases, it was found thatsome training program participants werethere only to collect daily allowances. Cautionshould be exercised when devising thesetypes of interim payments because they mayraise false expectations and jeopardize futureparticipation.

• At the district level, the general movementtoward a more decentralized public sector hasenabled broad political discussions on thelocal management of natural resources.However the decentralization process wasinitiated as recently as 1998 (by the new LocalGovernment Act) and the limited degree ofon-the-ground decentralization thus farachieved may affect the practical implementa-tion of CBNRM.

• Resources available at the district level were,in many respects, very limited, particularlyconcerning extension and government serv-ices delivered to the communities. Thedecentralization process must, therefore, beaccompanied by increased resources avail-able to district authorities either from thecentral level or from the increased localrevenue, taxes, ground rent, levies, etc.


For more information on this project, read someof these publications available from Danida: "LakeChilwa Wetland and Catchment ManagementProject," Project Document, April 1998; "LakeChilwa Wetland State of the Environment Report,"June 2000; "Lake Chilwa Wetland and CatchmentManagement Project," October 2000; "LakeChilwa Wetland Management Plan," September2001; "Lake Chilwa Wetland and CatchmentManagement Project," Project completion report,December 2002. Or contact, in Malawi, theDirector of the Environmental Affairs Departmentand in Danida, Andreas Jensen ([email protected]).



This project illustrates a case of privatesector–community partnership that runs a conser-vancy for tourism and hunting.

Background

The Torra Conservancy, established in 1998, wasone of the first of its kind in Namibia. It is locatedin the Twyfelfontein region of the KuneneProvince in northwest Namibia and covers 80,000hectares. It has 300 members and an estimatedpopulation of 500 living within the conservancy.The conservancy is characterized by spectacularmountain scenery and a wide range of wildlife.The main production activity is livestock farmingbut because of the arid conditions cattle numbersare low. Opportunities for paid employment arelimited in the area and many of the young peoplefrom the community migrate to urban areas tolook for work. The need for jobs is one of the key

factors influencing the conservancy committee’sdecisions.

Establishing and running a conservancy impliesresponsibilities and costs in addition to thoseexplicitly specified in hunting and tourism agree-ments. In order to qualify for an annual huntingquota (issued by the government), the conser-vancy needs to demonstrate that it is managingthe resource well. This requires expenditure onmonitors to guard against poaching, surveys ofwildlife resources, and maintenance of the conser-vancy (e.g., fencing and water holes). Theconservancy, as of 2000, employed five gameguards, one secretary, and a field officer. Itmaintains an office and a vehicle, with the conser-vancy committee putting in unpaid time. Runningcosts are estimated at N$ 137,000 annually, ofwhich 20 percent is provided by Integrated RuralDevelopment and Nature Conservation (IRDNC),an NGO. IRDNC also employs a field coordinator


Case study 7. Namibia—The Torra ConservancySummarized by Camille Bann / IIED from works by D. Roe, M. Grieg-Gran, and W. Schalken

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Meeting to discuss the quota and charges of trophy hunting, Torra Conservancy, Kunene, Namibia

who acts as treasurer on an unpaid basis for theconservancy. The intention is for external assis-tance to be phased out so the conservancy willhave a greater cost burden in the future. Theconservancy is therefore keen on developingincome-generating activities to cover these costs.Nevertheless, the community has showed, in thecourse of negotiations with companies, that otherissues such as ownership, employment, and nonfi-nancial benefits are also high on its agenda.

In 2002 the Torra Conservancy was the onlycommunity in Namibia that had both tourism andhunting agreements. It also provided the onlyexample in the country of a formal agreementbetween a large tourism company and acommunity—a good model for other communitiesto follow.


In 1996 the Residents Trust, which preceded theconservancy, signed an agreement withWilderness Safaris (WSN’s), a large Africanadventure travel company, for the establishmentof a luxury tented camp, Damaraland. Directfinancial benefits to the community from theDamaraland Camp include a lodging tax of 10percent of the accommodation price (net of salestax) and an annual rental of N$ 3,000 for thepermission to occupy the land. Payments to thecommunity from lodging taxes have been fairlysignificant despite low occupancy levels; betweenJuly 1998 and June 1999 they amounted to N$174,846, equivalent to N$ 582 per communitymember (although revenues have not beendistributed this way). This would be comparableto about three months of pension payments orwages from casual agricultural labor.

Community representatives demanded thatWSN’s train employees and transfer its ownershiprights rather than increase its revenue share. Asa result of these negotiations, employment atDamaraland Camp is considered an important

benefit for the community. It pays more and ismore reliable than the other two employmentopportunities available in the region. Fourteenpeople from various parts of the conservancywork and live at the camp. In addition, there isemployment for people who live in the camp'svicinity. Payments of salaries (including salariesof those who do not live in the camp) are aroundN$ 200,000 per year. In addition, small amountsare paid to the community for laundry services(N$ 4,930 over the 12 months to June 1999).Ownership of the venture was a key issue in thenegotiations and a flexible approach was adopted.The agreement states that WSN has ownership ofthe assets of the enterprise but allows for thepossibility of the community purchasing theassets either at the end of the 10-year agreement,or extending the contract by five years andacquiring 20 percent of the assets each yearthrough a corresponding reduction in thepayments of rental and lodging tax levy. Atraining program was also negotiated. Thus,some community members benefited from thecompany’s expenditure on training, estimated atN$ 23,812 in 1998/99.

Benefits from hunting agreements have beenprimarily financial but the conservancy is consid-ering ways of increasing nonfinancial benefits aswell. In 1998 Savannah Safaris, the company withthe hunting concession, paid a lump sum or areafee of N$ 17,000 and fees per animal shot thatamounted to N$ 120,000. It was also agreed thatbushmeat from animals hunted by the safaricompany would be distributed locally. There wasno provision for formal training in the agreementbut people from the community were involved inskinning and thus learned by doing. In addition,one of the conservancy’s game guards workedwith the hunting company although the conser-vancy did not pay him. Part of the reason for thepredominance of financial benefits is that huntingcontracts have been only one year long. Theconservancy committee intends to move to three-year contracts in order to increase the scope for



nonfinancial benefits. The short-term nature ofthe contract also explains why there has been noinvestment by the hunting company in lodgingwithin the conservancy.

Project lessons

The Torra Conservancy has done very well inrelation to similar initiatives in other Namibiancommunities. Some of the reasons for its successare the high value of its landscapes and wildlife,high level of interest from important travelcompanies, and the well-organized community. By2001 the conservancy had two agreements withtotal revenues far exceeding the costs of runningit, and it was also likely to benefit from a proposedagreement with Skeleton Coast Fly-In Safaris.However, as of 2002, conservancy representativesfelt that nonfinancial issues, particularly localinvolvement in management, were moreimportant (a training program agreed on as partof the Damaraland negotiations has been slow todevelop). The conservancy committee turned

down a proposal that did not sufficiently involvethe community—the conservancy wanted thecommunity to retain access to the land involvedand for there to be a training component, whilethe investor wanted the site for his exclusive use.Wilderness Safaris submitted a proposal for arhino-tracking venture at a site called Poacher’sCamp. The conservancy requested a moredetailed proposal with income projections overfive years. They recognized Poacher’s Camp as asite with great tourism potential and have consid-ered starting their own enterprise there.Alternatives to a community-owned enterprisewould therefore have to clearly demonstrate theirmeans of generating income for the conservancywhile involving the community.


For further information, peruse the book by Roeet al. 2001 available at www.ieed.org; or contactMaryanne Grieg-Gran at [email protected].


This case illustrates an innovative partnershipbetween an NGO and a private business, and theopportunities and challenges that it entails.

Background

In October 1990, a groundbreaking and innovativepartnership between WWF–South Africa (WWF-SA) and a major South African bank, Nedbank,established an environmental fund known as "TheGreen Trust." Since its inception, the trust hasraised over R47 million (approximately 5 millionU.S. dollars) and has supported over 125 conser-vation projects with a strong emphasis on theinvolvement of local communities. The projectsfunded are primarily within South Africa but somehave been funded in Mozambique, Malawi, andNamibia.

Back in 1990 when the Green Trust was foundedconservation organizations in South Africa wereseeking a new image for conservation. Althoughthe country was still a few years away from freeand fair elections, there was already a conscious-ness among conservation NGOs of the need tobridge the gap that existed between the NGOsand millions of disenfranchised people in thecountry. Conservation was at best unknownamong many rural communities and at worsttainted with an image of a white middle-class play-ground fiercely protected by paramilitary gameguards. It was only during the early 1990s thatconcepts such as "people and parks" and"community-based conservation" began to takeform and to become entrenched in conservationpolicy. These were exciting times. The field wasfresh and untested and the needs enormous.

Case study 8. South Africa—The Green TrustReported by Thérèse Brinkcate / WWF–South Africa

Without a doubt it presented one of the mostimportant challenges that South African conserva-tionists had yet faced. But challenges lie in thefoundations of conservation—and the creation ofa new conservation fund, especially a fund specifi-cally targeting community-based conservation,introduced financial muscle into the realm of loftyidealism. The vision of the partners in the GreenTrust, WWF-SA and Nedbank, in creating thetrust was a significant contribution to conserva-tion in South Africa.

The Green Trust is a mutually beneficial businesspartnership and Nedbank's support of the trust isnot simply charity. The benefits to Nedbank lielargely in the contribution that the trust adds tothe bank's marketing strategy, which ultimatelyaims to establish new clients and maintain clientloyalty by appealing to the clients' sense of contri-bution to a higher cause.

The projects funded by the Green Trust havecovered a significant range and a diverse group ofenvironmental interventions with a strong focuson community-based conservation. However,over time, there has been some pressure from thedonor for more species-focused projects, thethought being that these might appeal to theNedbank client. This has been dealt with bycreating a broad-ranging portfolio of diverseprojects that allows for high-profile flagshipprojects and less appealing but no less importantconservation projects.

From 1998 to 2002 the trust’s funding prioritieshave included sustainable use of renewablenatural resources; species and habitats of specialconcern; protected areas; support to the develop-ment of legislation; policies and treaties related toSNRM; pollution control; and consumption ofnonrenewable natural resources. In addition,three approaches are recognized as importantprocesses in achieving environmental conserva-tion and will, wherever possible, form part of thefocal priorities—these are community-based

conservation, environmental education, andcapacity building in environmental conservation.

Projects funded by the Green Trust have encom-passed both urban initiatives such as community-driven urban greening as well as ruralcommunity-based natural resource managementinitiatives. The trust has also facilitated theconservation of some highly endangered species,including the African wild dog, the cheetah, theblue swallow, the Kalahari lion, and the Brentonblue butterfly. All of these projects look closely atinnovative ways of managing species-humanconflict. On a more strategic level, the GreenTrust has influence at the highest levels of theSouth African government through its support ofadvisors to four different Ministers: the Ministerof Water Affairs and Forestry, the Minister ofLand Affairs, the Minister of EnvironmentalAffairs and Tourism, and the Minister ofEducation.

The Green Trust is administered by WWF-SA. Ithas a staff of two full time persons (a managerand an assistant) who are the direct link betweenthe executors, Nedbank, and the board ofdirectors. They handle daily business such asprocessing new applications for funding, designsfor new projects, drafting contracts, approvingreports, managing project payments, monitoringprogress of projects, and maintaining communica-tion with executors. An important additional roleis maintaining the relationship with Nedbank andmanaging media links to get as much exposure ofthe trust and its projects as possible. These twostaff members work as part of the whole team atWWF-SA and report directly to the trust’s boardof directors.

The board meets three times a year to evaluatethe status of projects and to approve any fundingfor new projects. It consists of three membersfrom WWF-SA and three members fromNedbank. The board of directors in turn reports



to a board of trustees who meet once a year toevaluate the status of the trust.


Nedbank initially donated seed money of R5million when the Green Trust was established in1990. In 1995, this pledge was renewed for anadditional five years. In late 1999, Nedbankrenewed its commitment to the trust with apledge of R7 million over the next five years. Inaddition to this direct financial support, Nedbankimplemented a unique and innovative way ofproviding ongoing financial support, namely arange of "Green" banking products, throughwhich bank clients make contributions to thetrust. These products include youth and adultsavings accounts, checkbooks, ATM cards, andcredit cards. The Nedbank Green home loan wasadded to the product range in early 1999, and thebank will also offer Green insurance (R1 perpolicy per month is donated to the Green Trust).The Green affinity banking products are the onlybanking products available that are aimed atrestoring, preserving, and developing SouthAfrica’s wealth of natural resources. The "green"visuals on the checkbooks and cards indicate theclient’s contribution and commitment to the envi-ronment. All of the money accrued by Nedbankfrom these promotions is passed on to the GreenTrust. The Green banking products allowNedbank clients to support the aims of the trustand of WWF-SA through Nedbank, at little cost(and no additional effort) to themselves. Theseaffinity products have enabled Nedbank, itsclients, and other stakeholders to generate inexcess of R47 million for the Green Trust from1990 to 2002.

However, after 10 years, the bank reported stag-nation in the amount of clients who support thevarious Green banking products. In May 2001,Nedbank revamped its "Green" brand with awhole new marketing campaign under thebanners of Nedbank Green, Nedbank Arts, and

Nedbank Sports to try to revitalize it. Nedbankalso has tried to compensate for the decline in itsbrands approach by offering various"lifestyle–enhancing" packages to clients. In thisframework a particular problem for the GreenTrust is that the Green brand is only one of themany brands offered by the bank and is often notactively endorsed by regional branches. Clientsmay then assume that they are contributing to theGreen Trust when, in fact, they are not.

Project lessons

This being a business-NGO partnership, Nedbankoften had expectations that were beyond thecapacity of a conservation NGO—for example, theassumption that the Green Trust would "market"itself, using funds designated for conservation.The lesson here is that expectations must beclearly spelled out from the beginning.

The original agreement between WWF-SA andNedbank was a loose agreement which stoodmost definitely in the bank's favor. Theagreement has now been restructured in order toachieve a more equitable partnership, but notbefore causing some damage to the partnership.The lesson here is that an explicit agreementmust be made right from the start. A key issue isestablishing a positive relationship between thepartners and maintaining it through staffchanges.

The demand for marketing profile from Nedbankhas led to some pressure for certain types ofprojects to be funded, for example, species-focused projects that would appeal to the generalclientele of Nedbank. The lesson here is thatthere is some need to provide a certain "give andtake" in such a partnership but Nedbank haseasily been accommodated by ensuring that thetrust has a balanced portfolio with some key high-profile projects interspersed with less publicityworthy but no less important projects.


As a highly innovative and unique fundingmechanism for conservation the Green Trust hasachieved much since its inception. No matterhow successful this fund is, though, its long-termsustainability is by no means guaranteed. Thetrust has been in place since 1990, but with thecurrent agreement between WWF and Nedbankending in 2005, the future is uncertain. A worldeconomic slowdown, increased competition, andaggressive changes in branding and marketingmay result in Nedbank taking a less favorablelook at its involvement. Having said this, though,undoubtedly the trust would be able to continueon reserves for a certain amount of time, having

established itself as an important conservationentity in its own right, and if necessary it mightpossibly find alternative donors. The lessonslearned in terms of the business agreement,marketing strategies, and demands of businesspartners are crucially important for conservationorganizations seeking to replicate this fundingmechanism elsewhere.


For more information on this project visit www.wwfsa.org.za.


This case illustrates a private sector–communitypartnership for wood production.

Background

In an outgrower scheme a company providesmarketing and production services to farmers togrow trees on their land under purchasing agree-ments laid out in a contract. By 2002 outgrowerschemes in South Africa involved some 12,000smallholder tree growers on about 27,000hectares of land. The two schemes with thelargest membership are operated by the country’sbiggest forestry companies, Sappi and Mondi.While outgrower timber only provides about 10percent of the two companies’ pulp mill output,and is more expensive per ton than wood fromother sources, it provides the fiber that wouldotherwise be unavailable because of land tenureconstraints. This allows the forestry companiesto achieve a volume of production that reachesvaluable economies of scale. The scheme alsoprovides companies with a progressive image thatis crucial at a time when the distribution of landrights in South Africa is being called intoquestion.

Two other outgrower schemes provide alterna-tives to the private company schemes, oneoperated by the South African Wattle Growers’Union and the other by Natal CooperativeTimbers, which provides wood, fiber, and wattlebark to tanning extract factories.

Community motivations for joining outgrowerschemes are primarily tied to the cash income atharvest; trees are also seen as a form of savings.Other minor incentives include ease of manage-ment compared with food crops, reliability ofyield, and the possibility of obtaining fuel andselling wood to neighbors. The major barrier tohouseholds joining the scheme is inadequatelandholdings. Other reasons include the longgrowing cycle, fear of cattle damage, and concernfor what would happen if the timber companies nolonger needed outgrowers’ trees.

Competition with food crops for land or labordoes not appear prevalent as yet in all thereviewed cases because trees are generallyplanted on land unsuitable for food crops andoperations are carried out during times in theyear when agricultural activities are minimal. But

Case study 9. South Africa—Outgrower schemesSummarized by Camille Bann / IIED from works by J. Mayers and S. Vermulen


there is evidence that outgrower woodlots havedepleted water sources in some areas—andcontrary to expectations, they also do not signifi-cantly improve fuelwood availability.

Financing arrangements

Smallholders grow eucalyptus trees withseedlings, credit, fertilizer, and extension advicefrom Sappi and Mondi, two forest companies. Inreturn the companies expect to buy all theharvest at the end of the growing cycle.

The South African Wattle Growers’ Union and theNatal Cooperative Timbers operate in a similarway but, in addition to financing the inputs’ costand marketing the output, they seek the bestprices for the products and offer a share of thedownstream tanning factory profits.

Project lessons

Outgrower schemes have substantiallycontributed to household income in communities,providing participating households with about 20percent of the income needed to be just over thenational "abject poverty line." But the schemesalone cannot take households out of povertybecause access to land in communal areas islimited. Small growers also face problems withopaque government policies and uncoordinatedservice provisions from public agencies. Theirassociations lack the power to engage with thepolicies and institutions that affect their liveli-hoods. Nonetheless, outgrower schemes havehad positive impacts on communities’ asset bases.Land rights have been secured and infrastructurehas been developed in some areas. The schemeshave even been able to benefit the poorest andmost labor-deficient of smallholders, through thecredit extended by companies. The landless poorhave benefited in some areas through employ-ment—such as weeding, tending, harvesting, ortransport. But some outgrowers are dissatisfiedwith being tied to supplying a single timber


Forestry workers in Mondi's Gilboa Plantation in South Africa's KwaZulu Natal province.

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industry client. These South African experiencessuggest the following lessons:

(a) A strong field staff giving sound technicaladvice is crucial;

(b) Competent administration saves money;

(c) Intercropping with legumes in the first twoyears gives growers income in the earlystages and improves soil fertility;

(d) Consolidating should be preferred overspreading too thinly across areas—transportcosts and other costs are prohibitive ifvolumes per area are too low;

(e) Strong relationships between growers are vital;

(f) Transparency is essential—e.g., allocationsystems must be explained in terms of supplyand demand. Reasons for cutbacks must beunderstood by all concerned;

(g) Management needs change over time—in theearly years it is focused on silvicultural exten-sion, later on managing timber supply, e.g.,on quota systems and contractors’ availabilityand pricing; and

(h) Reputation rather than heavy marketingspreads the word.


For further information peruse Mayers andVermeulen (2002), available at www.iied.org; orcontact the author at [email protected].


This case illustrates how an SNRM projectbranches out to a new initiative that requires newpartners and new financing arrangements, in thiscase a partnership between private businessesand the local community.

Background

This case study looks into a recent offshoot of theDanida-funded MEMA project in Tanzania.MEMA is a Swahili abbreviation for sustainablemanagement of natural resources and protectionof nature values. The project was initiated in 1999and operates in the northern part of the Iringaregion, a part of Tanzania’s central highlandsextending from the northern tip of Lake Malawito approximately 100 km south of Morogoro andDodoma. MEMA facilitates the transfer of userrights and ownership of natural woodlands andforest reserves to local communities. As of 2002the forests involved included the Nyang’oroForest Reserve (118,000 hectares), KitapilimwaForest Reserve (3,699 hectares), and village

forests surrounding the Kitapilimwa ForestReserve (12,042 hectares). MEMA encouragesthe establishment of village natural resourcecommittees in charge of the management of theforests, based in a management plan developedby the villagers and facilitated by MEMA.

Overall MEMA objectives include the following:(a) to develop, test, and implement replicablecommunity-based forest management models forenvironmentally sustainable management ofnatural forests and woodlands in the pilot areas;(b) to support capacity development in naturalforest, woodlands, and biodiversity resourcemanagement in Iringa District; and (c) to supportthe marketing of products from the resourceshanded over to the villages. Ownership and theability to generate income are crucial to the part-nership.

With MEMA financing and technical advice fromthe District Lands, Natural Resources andEnvironment Office and the national Forest and

Case study 10. Tanzania—MEMA ProjectReported by Karsten Raae / Danish Forestry Extension / member of Danida’s WGSF


Beekeeping Division, villages in the project areahave taken over the management of traditionalcommercial woodland products such as charcoaland fuelwood for tobacco and fish curing.

During a January 2002 mission to the MEMAproject area a Danish consultant discussed withthe local stakeholders the potential of the area toattract international ecotourism. Local andnational partners were identified and the initialconcept was developed. The Danish consultantfollowed up on the search for internationalpartners and brought a group of full-payingguests to test the area. The test took place inSeptember 2002. Encouraged by the positiveresults, the participants decided to establish anoperation based on long-term business-to-business relations among three partners; the

villagers (supported by the DistrictAdministration and MEMA); a locally based touroperating company, JGST (Jungle Giraffe SafariTours ltd.); and a Danish travel agency, DJ(Dumas-Johansen Agricultural Tours). The threepartners’ responsibilities are as follows:

• Villagers—Providing services and renting outrights to use their natural resources forhunting, fishing, camping, etc.

• JGST—Hospitality and organization of allactivities in Tanzania such as agreementswith villagers, logistics, and safety.

• DJ—Marketing in Europe and providing aprofessional guide to accompany the groups.


The lush forest of the Udzungwa Mountains National Park, the largest remnant Eastern Arc forest, Tanzania

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Financing arrangements

The January 2002 consultantancy was financed byDanida through the MEMA project, as was theconsultant who accompanied the test group inorder to monitor the concept and evaluate thecapacity and performance of JGST. MEMA hassupported the villagers in their efforts to deliverservices and JGST in its efforts to become aserious partner with the Danish travel agency. Forall of this MEMA has invested about 150,000 DKKand quite a number of hours from expatriate staffand regional staff, all financed by Danida.

The unanimous conclusion from the pilot run wasthat the concept was appropriate but improve-ments were needed especially on the quality ofthe camp established on community land. Hence,it was decided to apply to Danida’s Private SectorDevelopment Program for help with a start-upfacility; 500,000 DKK was granted in January2003. A Danish consultant will facilitate thehandover of the concept, will act as a liaisonbetween JGST and DJ, and will help with themarketing in Europe. The first tour was expectedto take place in August 2003 on fully commercialterms, and there are good prospects that it willdeliver substantial benefits to all three partners.

Project lessons

Through the ecotourism initiative a village naturalresource committee has been established, and itscapacity improved. Value has been added to localnatural resources, which makes it more likely thatthey will not be overexploited and lose theirability to generate income—hence, nature protec-tion has been improved. Through the VillageLand Certification and Forest ManagementAgreements supported by MEMA, villagers areconfident in their ownership of the naturalresources and are more willing to participate inthe tourism scheme. Jobs have been createdresulting in substantial income.

A plan for tourism will be developed based on anarrangement that includes maximum involvementof locals on a regional and especially village level.That means training people to be involved inhospitality, guiding, scouting, production of handi-crafts, and other services. Purchase of local goodswill take place whenever possible. The use ofnature will be based on sustainability principlesand there is no deliberate intention of introducingmass tourism.

The game shot by tourists will be consumed inthe camp and surplus meat will be distributed tothe villagers; quotas are calculated by the authori-ties and built into the village’s natural resourcemanagement plan. To a large extent this activitywill replace poaching. Former village poachershave been hired as scouts.

Walking safaris in the area will have minimalimpact on the woodlands except for the creationof a few primitive footpaths. The local fishers willorganize fishing; hence, it will not hamper theiropportunities, it will add to their income. Thevillages, according to what is allowed in themanagement plans, will provide firewood. Thecamp is built of local recyclable materials and theinfrastructure will be built into the landscape. Thecamp is only planned to remain in service for fourto seven years at the same location. Garbage, incases where it cannot be decomposed locally, willbe removed from the camp and enter the Iringatown solid waste management system.

Future of the program

In general, the potential is high for eco-tourism,which has been one of the fastest-growing indus-tries in recent decades. The area selected for thisproject has many of the features vital toecotourism: a distinctive and still unspoiled localculture, scenic beauty, reasonable infrastructure,national parks, mountainous rainforest, friendlypopulation, safety, etc.



A number of potential markets (consumergroups) have been identified so far, including: (a)Danish groups of 10–12 coming six to nine timesa year; (b) eventually similar groups from otherEuropean countries; (c) expatriates and uppermiddle-class households in the Iringa area usingthe camp for extended weekends; (d) expatriatesand upper middle-class households in other partsof Tanzania; (e) educational institutions andgroups of students from abroad and fromTanzania using the camp for training, courses,and "summer school"; and (f) organizations, insti-tutions, companies, and the like using the campfor workshops, seminars, etc.

It is important to start up the business slowly soas not to overwhelm the capacity of the twoTanzanian partners (JGST and the villagers) andthe carrying capacity of the area, which stillneeds to be assessed.

This is a very recent initiative and its success willdepend, among other things, on the continuedsupport of the MEMA project; retainingcommitted staff at the district administrationoffice; good personal contact and mutual trustamong district staff and villagers; local hospitalitycompanies' willingness to innovate and upgradeservices; and continued commitment from theDanish participants in the tourism scheme.

Many difficulties remain and must be dealt with.At the local level, although the MEMA programhas fostered the devolution of resource ownershipto villagers, titling is lagging and villagers areinsecure about their rights. Also, villagers have

low social capital28 and a history of mistrustingpublic authorities, especially those at the nationallevel. The project will have to deal with legislationthat lacks transparency and also, with inconsistentenforcement. For example, hunting regulationshave been passed by parliament but are notenforced. The tourism infrastructure is poor andboth local tourist operators and villagers havelittle understanding of the importance ofproviding tourist services of quality and consis-tency to attract foreign ecotourism.

As for the barriers the project must negotiate atthe national government level, the most serious isa lack of consistent support due to a certaindegree of mismanagement, a laissez-faire attitude,carelessness, ignorance, and corruption.


For more information on this project contactDFE's Karsten Raae ([email protected]); IringaDistrict Council's Jumanne Hanti([email protected]); FBD Iringa's JohnMassao ([email protected]);MEMA/Danida's Henrik Lerdorf([email protected]); and JGST's ZabronLuvinga ([email protected]).


28 Social capital is defined as the ability and willingness to cooperate. There mustbe a general level of trust, a tradition for networking, and confidence amongmembers of society.

This case illustrates the accomplishments andshortcomings of a trust fund and several institu-tions trying to protect a World Heritage Site.

Background

Mgahinga Gorilla and Bwindi ImpenetrableNational Parks are critical afro-montane habitatslocated in the southwestern corner of Uganda,close to the borders with the DemocraticRepublic of Congo and Rwanda. Previously forestreserves, both areas were upgraded to nationalpark status in 1991. Bwindi Impenetrable NationalPark (BINP) is one of 29 forests in Africaaccorded the highest conservation status and wasdeclared a World Heritage Site in 1994. It servesas an enclave for at least 12 Red Data Bookspecies that are endangered or threatened withextinction. It is the only forest in Africa with acontinuum of low-to-high altitude forest types, andthe rare afro-montane vegetation provides therichest habitats in east Africa for birds (346species), butterflies (202), and trees (200). It alsohosts 120 mammal species, seven of which arediurnal primates, including chimpanzees and justunder half (circa 280) of the world's population ofmountain gorillas. Like Bwindi, Mgahinga GorillaNational Park contains rare afro-montane rainforest vegetation, but owing to the elevations ofthree volcanoes, Muhabura (4,127 meters),Sabinyo (3,645 meters), and Gahinga (3,475meters), it offers a particularly rich diversity ofhabitat that includes montane, bamboo, andalpine flora, and extensive marshes lying betweenthe volcanoes. At 34 square kilometers,Mgahinga is Uganda's smallest park, but supportsa great diversity of wildlife.

The Bwindi Trust is overseen by a board oftrustees consisting of members of national

government institutions; local community repre-sentatives; members of CARE (an internationalNGO), a local NGO, and a local research institute;and representatives of the private sector. On thelocal level, representatives drawn from communi-ties surrounding the two protected areas haveorganized a Local Community SteeringCommittee (LSCS) to vet and select developmentprojects for trust funding and increasing localconservation awareness.

According to its bylaws the trust’s overallobjective is to maintain the biodiversity andecosystem health of the Mgahinga Gorilla andBwindi Impenetrable National Parks. This is nota narrowly defined conservation project and asubstantial portion of the annual expenditureactually goes toward supporting local develop-ment projects in the immediate vicinity of the twoprotected areas. In recent years the trust hasinvested in the following:

• Community development activities: Thisincludes support to communities, groups, orindividuals for social development projects orbusiness activities. Sixty percent of theannual budget of the trust is spent on theseactivities.

• Research and ecological monitoring: Twentypercent of the trust's annual budget goes intosupporting long-term ecological monitoring(via a local research institute) as well asstudies undertaken by Ugandan students orother local researchers.

• Park management: Twenty percent of theannual budget goes to support increasedmanagement capacity of the two parks—through capital purchases, training support,and covering some recurrent costs as well as


Case study 11. Uganda—Mgahinga and Bwindi Impenetrable ForestConservation TrustReported by Tom Blomley / CARE International


supporting the Trust Administration Unit:This covers salaries, office rent, utilities, andother recurrent running costs as well as thecosts of regular board and local communitysteering committee meetings.

The trust has been working alongside a numberof other organizations united by a commoninterest in the conservation of the two protectedareas and the sustainable development of therural areas in the immediate vicinity. Other keyplayers have included the CARE DevelopmentThrough Conservation Project, the Institute forTropical Forest Conservation, and theInternational Gorilla Conservation Program.Given the range of players working on similarissues together with district local governmentsand the Uganda Wildlife Authority, it is hard toassess or attribute to the trust all of the improve-ments witnessed in the area over the last decade.However, on a broad scale, the changes havebeen impressive. From a deeply conflictivesituation in the early 1990s, following the estab-lishment of the two national parks (and the associ-ated loss of benefits to local people), there areincreasing signs of acceptance of the twoprotected areas as well as signs of increasingcollaboration between local communities and parkmanagement authorities. Some of the key indica-tors to date include:

• Changes in local attitudes. CARE and thetrust have been tracking changes in local atti-tudes toward the two parks and the parkauthorities by randomly sampling householdsliving in the immediate vicinity; these studiesshow dramatic positive changes.

• Reversals in encroachment rates. From the1970s to the early 1990s agriculturalencroachments over the boundaries of thetwo protected areas were significant andlargely unchallenged. Much of this wascaused by the breakdown of law and order inthe country at the time and the effective"open access" nature of the two national

parks. However, since 2000 there have beenno recorded encroachments and the bound-aries of the two parks are being entirelyrespected by local people, despite the limitedability of the parks' staff to effectively patrolthese remote areas.

• Reduction in fires. In the early 1990s,following the establishment of the twonational parks, arson was a common occur-rence. Fires continue to be a problem, butthis is largely because agricultural clearanceat the end of the dry season is often facili-tated by burning bush on fallow land, whichcan easily spread into forest areas. What issignificant is that on many occasions since2002, community members were quick torespond to fire outbreaks and assisted parkmanagement by swift reporting as well asactive (and voluntary) assistance in extin-guishing the fires before more seriousdamage was caused.

• Improvements in health care. The trust’s ruraldevelopment initiatives have made a clearimpact. Clinics built in remote rural areas farfrom district health services have had asignificant impact in reducing local mortalityfrom diseases such as malaria and cholera,while enrollment in primary schools has beenboosted following the construction of localprimary schools. Local incomes have beenraised as a result of income-generating activi-ties such as beekeeping and tailoring. As aresult of targeted information campaigns,local beneficiaries are able to clearly appre-ciate the links between local developmentprojects and the continued existence andprotection of the two national parks.


The main financing mechanism envisioned by thepark stakeholders was a conservation trust fund.The Mgahinga and Bwindi Impenetrable ForestConservation Trust (commonly known as theBwindi Trust or MBIFCT) was established as an


independent organization in 1995, with an initialgrant from GEF of US$ 4.3 million. This moneybecame the trust’s capital endowment, wasinvested in the London stock market, andmanaged by a U.K.-based asset management firm.The original idea was to let that capital compoundto reach about US$ 10 million dollars at whichlevel the interests on the principal would beenough to pay for the trust’s annual budget—theunderlying principle being that if the trust’scapital base remained intact it would ensure thefinancial sustainability of its activities in thefuture. Hence, the original capital was not tappedand grew to 7.4 million dollars by late 2002 whenplummeting stock markets reduced it to a currentvalue of approximately 5.4 million dollars.

Since1995 several other sources have contributedto the trust’s conservation activities in and aroundthe parks. The United States Agency for

International Development (USAID) and theDutch government were major donors. Otherdonors or institutions directly working in the areaincluded CARE, WWF, the International GorillaConservation Program, Uganda’s Institute forTropical Forest Conservation, Uganda’s govern-ment, and Park’s Revenue Sharing Programthrough which 20 percent of the parks' gate entryfees were spent on social projects in nearbycommunities. From 1995 to 2002 the trust wasable to use these other sources of money andkeep the trust fund untouched. However, in late2002 the support from USAID and theNetherlands ended and the trust was forced tobegin withdrawals from its capital account inLondon.

The main challenge that the trust faces is its long-term financial sustainability. Despite significantsuccesses in terms of both environmental and


Two game guards at Bwindi Impenetrable Forest National Park

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social development impacts, as well as the highprofile of the two "gorilla-parks," obtaining addi-tional funding beyond the original GEF grant andthe two early large donors has proven difficult.This, combined with recent losses on theendowment due to falling stock markets, hasresulted in a bleak financial outlook. If the trustis to have a long-term future the capital baseneeds to be significantly raised beyond its currentlevels. In the short term, the trust is attackingthis problem on two fronts. First, cost reductionmeasures are being analyzed with a view toreducing operational running costs to a minimum.At the same time, a deliberate fundraisingstrategy is being pursued to raise the overall levelof the endowment—from private donors inEurope and North America as well as from moretraditional institutional and bilateral donors.Unfortunately, it has proven extremely hard toobtain funds from private foundations and truststo supplement the Bwindi Trust endowment—largely because many of these grantmaking insti-tutions question the sense in transferring fundsfrom one endowment to another, particularly ifrates of return are insecure.

In terms of reducing costs, significant challengesremain as well. The project's working area islarge, remote, and inaccessible, necessitatingfour-wheel-drive vehicles and causing them signif-icant wear and tear. In addition, the trust is basedon principles of accountability and transparency,with a local steering committee drawn fromlocally elected representatives, which screens andselects funding proposals, and a national board oftrustees, which oversees the organization as awhole; these institutional arrangements havecosts and clearly there are trade-offs to be consid-ered between high levels of accountability andoverall cost levels.

Project lessons

The trust was the first of its kind in Africa and assuch it has been a pioneer, providing muchneeded guidance to other emerging conservation

trusts elsewhere on the continent. There havebeen frequent visits by representatives fromemerging trust funds in countries such asTanzania, Malawi, and Cameroon. Following theearly successes of the Bwindi Trust, GEF hasgone on to support the establishment of trustfunds in other parts of the globe, including SouthAmerica and Southeast Asia.

The basic fundamentals of the Bwindi Trust havehigh levels of replication—namely a locally run,transparently managed grantmaking body,supporting both conservation and local socioeco-nomic development, drawing funds from a capitalendowment. However, some key lessons haveemerged from the last decade which may be of


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use to others about to embark on a similarventure:

• The initial grant was too small to sustain thetrust in the long term. It is essential toconsider the size of the endowment needed tosupport the long-term operations of a conser-vation trust and ensure that the startingcapital is not too far off this figure.

• A fundraising strategy was only seriouslyconsidered when finances became a majorissue. It is essential to develop and fund along-term fundraising strategy at the earliestpossible stage to avoid funding and financingcrunches later on.

• Measures should be put in place to reinforcethe conservation-development linkage. In the

early days of the Bwindi Trust it wasassumed that if people were to make theconceptual link between trust-supportedinitiatives and conservation, micro-projectshad to center around natural resource activi-ties such as planting woodlots, handicraftprojects, and energy-saving stoves. Itbecame increasingly clear that, provided agood communication strategy was put inplace, it was possible to meet people’spriority development needs (such as health,education, or income) and still increase good-will toward conservation.


For more information on this project visitwww.mbifct.org or contact Tom Blomley [email protected].


This case summarizes one of the best-known—and still argued about—examples of community-based wildlife management in Africa.

Background

The Communal Areas Management Programmefor Indigenous Resources (CAMPFIRE) wasformulated by Zimbabwe’s Department ofNational Parks and Wildlife Management(DNPWLM) in 1986. Two rural districts (Guruveand Nyaminyami) were initially identified assuitable for the program and activities in thembegan in 1988. Following that start many otherZimbabwean rural districts joined the programand by 1996, 27 districts were actively engaged init. The projects are run by the rural districtcouncils involved, with advice from DNPWLMand technical expertise provided by variousnational and international NGOs, including WWF.

CAMPFIRE was developed as a tool to solve andavoid the many conflicts in the use of wildliferesources within Zimbabwe. The program’s mainobjectives are as follows:

• Sustainably exploit wildlife in the communalareas;

• Curb land degradation caused by tilling byoffering the alternative of sustainable wildlifemanagement;

• Enable rural communities to benefit directlyfrom indigenous wildlife; and

• Minimize the threat posed by wildlife tohumans and vice versa.

CAMPFIRE depends on a number of interrelatedecological, economic, social, and institutionalfactors. Ecologically, it hinges on the propositionthat the management of wildlife is an appropriateform of land use in areas that are of marginalinterest for agriculture. Economically, it is based

Case study 12. Zimbabwe—CAMPFIRE ProjectReported by Søren Hastrup / PFF Consult / member of Danida’s WGSF


on the assumption that markets exist for thegoods and services that can be provided underthe program. Institutionally, the program'ssuccess depends on the flexibility of governmentagencies and district authorities and their willing-ness to empower communities in communal areasto participate. Although CAMPFIRE is not apanacea for communal land development, it repre-sents a bold change in the thinking of ecologists,environmentalists, planners, and policymakerswith respect to their perceptions of naturalresources and conservation.

CAMPFIRE projects have been implemented insparsely populated areas where the tsetse threatwas removed or in rugged terrain of little agricul-tural value. The program involves changingpeople’s perceptions of wildlife, and fostering thenotion that wild animals constitute a viableresource base to be protected and utilized.

Benefits that have been accrued from theprogram's activities—mostly the sale of huntingand fishing permits as well as leases for tourismpurposes—are distributed among communities,and have been used in construction works (e.g.,schools, rural clinics, electrical fencing, roads,and establishment of grinding mills) in provisionof food and water as well as payment ofhousehold dividends and cash compensation.

CAMPFIRE very quickly became a success—tosuch a degree that the ruling party, ZANU-PFclaimed in 1990 that the program had been aparty innovation. In 1991, 12 districts generatedUS$ 1.1 million. In the seven years from 1989 to1996, CAMPFIRE's revenues were around US$9.4 million.

A national CAMPFIRE Association has beenformed with the objective of promoting thewildlife interests of the rural district councils inthe political arena and serving as an association ofproducer communities. The association has beenvery successful in making communal-land wildlife

producers an important political voice, but it hasbeen less successful in its role as a producer asso-ciation, since its membership is restricted to ruraldistrict council representatives and does notinclude representatives from the communalwards. CAMPFIRE has been able to attractstrong support from donors.

Unfortunately, the recent years of political andeconomical turmoil in Zimbabwe have delivered ablow to all development programs, includingCAMPFIRE, and it is fair to say that 10 years ofCAMPFIRE success are in jeopardy.

The CAMPFIRE approach, endangered inZimbabwe, has been actively replicated in severalAfrican countries including Zambia, Tanzania,


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Namibia, and elsewhere. CAMPFIRE has becomea paradigm and a point of departure whendiscussing community-based natural resourcemanagement projects (CBNRM) in Southern andEastern Africa.


CAMPFIRE is an entrepreneurial approach todevelopment based on wildlife management usingmarket forces to achieve economic, ecological,and social sustainability. Potentially, it can satisfymany of the material needs of rural peoplewithout depleting wildlife populations ordegrading the natural ecosystem on which theirsurvival depends.

At its initial stage, funds for logistic and adminis-trative purposes were provided by USAID andtechnical expertise was supplied by the govern-ment’s DNPWLM, WWF, the University ofZimbabwe, and Zimbabwe Trust (ZIMTRUST, apublic trust fund devoted to the promotion ofrural economic and institutional development).Other NGOs, such as Denmark's MS came onboard later.

For the first couple of years, the rural districtsthat had received "appropriate authority" tomanage the CAMPFIRE concept were grantedvehicles, motorbikes, and funds to cover salariesof personnel (administration as well as gameguards) and initial training, which was all paid forby USAID. DNPWLM and the Zimbabwe PoliceForce provided the training of staff whereasWWF, World Conservation Union (IUCN), andZIMTRUST conducted information and capacity-building activities with the Rural CouncilAdministration, counselors, local communities,and CAMPFIRE staff.

This initial external support decreased after acouple of years (no standard procedure for thephase-out was in place, resulting in differenttrajectories among the districts) and increasingly

the districts would have to pay for the CAMPFIREcosts out of the program revenues. Most ruraldistrict councils had no problems in negotiatingthis transition since CAMPFIRE revenues wereconsiderably larger than costs incurred. In theearly 1990s, rural district councils that hadCAMPFIRE programs generated 65 percent oftheir own resources, whereas the country averagewas only 15 percent (with the rest coming fromcentral government allocations).

The rural district councils manage CAMPFIRErevenues according to DNPWLM guidelines thatrecommend keeping 15 percent of revenue as alevy, using up to 35 percent for district wildlifemanagement costs, and distributing not less that50 percent of gross revenue to producer commu-nities. The guidelines also specify that thecommunity’s wards should decide on the use ofthe dividend received from the rural districtcouncils. These percentages were initiallyhonored, and some of the councils were able topay back to the community as much as 75 percentof the total revenue. However, over the yearssome rural district councils have retained anincreasing portion of CAMPFIRE revenues andused them for purposes not related withCAMPFIRE costs or wildlife management.

Project lessons

In recent years the significance of CAMPFIRErevenues for the local population has decreasedas a result of rapid population growth fromincreased immigration to rural areas. In realterms this has resulted in an average decline infinancial benefit per household from US$ 19.40 in1989 to 4.49 in 1996.

Some decline in the wildlife population has beennoticed at some CAMPFIRE areas, a situation thatis complicated by disagreements between thelocal communities and the rural district councilsregarding each one’s responsibility for wildlifemanagement. Another issue has been the reap-



pearance of poaching. The intense poaching thattook place in Zimbabwe in the 1980s was signifi-cantly stopped by the CAMPFIRE program withwildlife populations regaining their numbers bythe end of the 1990s. But farmers saw this wildlifegrowth as a threat to their crops and have beenusing the Problem Animal Control legislation toencourage the return of poaching.


For more information on this project peruse thefollowing publications: ENDA-Zimbabwe andZERO, 1992, "The Case for SustainableDevelopment in Zimbabwe: Conceptual Problems,

Conflicts and Contradictions," CIDA; DavidHulme and Marshall Murphree, 2001, "AfricanWildlife and Livelihoods." Or you may contactSøren Hastrup ([email protected]). Also, theIIED has coordinated a multicountry evaluation ofcommunity-based conservancies. The main publi-cations are D. Roe et al., 2000, "Evaluating Eden:Exploring the Myths and Realities of Community-Based Wildlife Management"; and R. Hasler, 1999,"An Overview of the Social, Ecological andEconomic Achievements and Challenges ofZimbabwe’s CAMPFIRE Program," EvaluatingEden Discussion Paper No.3. These publicationscan be found at www.iied.org.


Villagers from Nyenyunga ward construct a teacher's house with their campfire wildlife earnings Gokwe district, Zimbabwe

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This chapter offers links to most of the referencesmentioned in the previous six chapters and listssome additional ones that we think can be usefulto the survey’s users.29 They are presented in twogroups as follows:

Guides and resources to financing forSNRM: Each one of these guides or Web sitesreviews a large number of financing mechanisms,offering examples and links. Most of them focuson all or some types of SNRM, but we haveincluded some more general guides (e.g., on ruraldevelopment financing, micro-financing, commu-nity-based financing) because they provide addi-tional insight and leads to financing for SNRM.Each entry provides a short description of what

the reader can expect to find in the institution ormanual in question. It also provides the Internetaddresses of institutions, when available.30

Publications on financing SNRM: These arepublications and Web resources of a more analyt-ical type, featuring in-depth discussions of one orseveral types of financing options, as well as casestudies. Each entry provides a short descriptionof what the reader can expect to find in the publi-cation in question, mentioning which financingoptions are discussed and listing the case studiesreviewed (many of them are mentioned in thedescription cards and elsewhere in this survey).

7. ACCESSING RESOURCES AND REFERENCESby Pablo Gutman, Nola Chow, and Sarah Janicke

GUIDES TO AND RESOURCES FOR FINANCING FOR SNRM

Conservation Finance Alliance. 2002. Mobilizing Funding for Biodiversity Conservation. A User-Friendly TrainingGuide for Understanding, Selecting and Implementing Conservation Finance Mechanisms [an online guide].

To download: www.conservationfinance.org or http://guide.conservationfinance.org/.

Organization: The Conservation Finance Alliance is a partnership of CI, GEF, GTZ, IUCN, Ramsar, Redlac, The NatureConservancy, UNDP, UNEP, USAID, The World Bank, Wildlife Conservation Society (WCS), and WWF.

Description: Created in 2002, the Conservation Finance Alliance, is a joint initiative of 13 institutions encompassingNGOs, international agencies, and donor agencies to foster the financing of conservation projects. Their Web sitedescribes the Alliance’s activities; provides links to related initiatives and institutions, including case studies; andprovides links to the Training Guide mentioned above. The Guide is designed to help expand the use of sustainablefinance mechanisms to support the conservation of biological diversity. The Guide is an interactive tool that alsoprovides instructions for project financial planning and links to other similar training material.

Country case studies: Ecuador, Suriname, Trinidad and Tobago, Mexico, Uganda, Belize.

Financing options: Markets for watershed protection (DC 13), biodiversity conservation and bioprospecting (DC 13),public budget funding of SNRM projects and programs (DC 1), environmental funds (DC 4), debt-for-nature swaps (DC 4),international development banks’ loans (DC 3).

29 Some references that have little relevance as a source of information onfinancing SNRM have been kept as footnotes and are not reproduced in thischapter.

30 The accuracy of all the Internet addresses was checked during the preparationof this survey. However, because Web sites are changed often, long addressestend to be short-lived. Thus it is probable that some of the publications’addresses in this chapter may not be in operation. In that case we suggest thatusers access the institution’s Web site (the first part of the address). Oncethere, you should be able to use the site’s search command to find the publica-tion in question.

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GUIDES TO AND RESOURCES FOR FINANCING FOR SNRM (cont’d.)

EPA-USA. 1999. “A Guidebook of Financial Tools” [an online guide].

To download: http://www.epa.gov/efinpage/.

Organization: U.S. Environmental Protection Agency (EPA) (http://www.epa.gov).

Description: This is a reference work intended to provide an overview of a wide range of payment mechanisms for envi-ronmental investments in the United States. The Guide features information on approximately 340 financial tools andreferences for further information. Although many of these tools may not be relevant for developing countries, manyothers are.

Country case studies: United States.

Financing options: Earmarking for SNRM a percentage of one or more general taxes collected at national, state, orlocal level (DC 1, DC 2), private-public partnerships (DC 11).

Global Development Research Center. 2003. “Virtual Library of Micro-Credit” [an online resource].

To download: http://www.gdrc.org/icm/index.html.

Organization: The Global Development Research Center is a virtual organization that carries out initiatives in education,research, and practices in the spheres of environment, urban, community, and information (www.gdrc.org).

Description: The Virtual Library on Micro-Credit contains tools, guides, strategies, courses, methodologies, successstories, best practices; articles, etc. Although not focused in SNRM it provides many useful guidelines for the SNRMpractitioner.

Country case studies: Worldwide examples.

Financing options: Links to foundations and NGOs that are potential funding sources (DC 7). Links to active micro-finance institutions in Latin America and the Caribbean, Central and Eastern Europe and the Newly Independent States,and Africa (DC 10).

Interagency Planning Group on Environmental Funds (IPG) (2002. The IPG Handbook on Environment Funds [anonline resource].

To download: http://www.biodiversityeconomics.org/pdf/topics-222-00.pdf.

Organization: IPG is a network of several public and private institutions.

Description: This is a resource book for the establishment and operation of environmental funds. It is intended to sharewith a wide audience the experience gained by directors and specialists who have been involved over the past 10 yearsin designing, setting up, managing, monitoring, and evaluating environmental funds.

Country case studies: Mexico (The Mexican Nature Conservation Fund), Costa Rica (FONAFIFO), Puerto Rico (PuertoRico Community Foundation), Brazil (Abrinq Foundation for Children’s Rights), Philippines (Foundation for the PhilippineEnvironment).

Financing options: Environmental funds (DC 4), multilateral aid and development agencies (DC 5), and bilateral aid anddevelopment agencies (DC 5).

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IUCN. 2002. Biodiversity Economics Library [an online resource].

To download: http://www.biodiversityeconomics.org.

Organization: World Conservation Union (IUCN) (www.iucn.org).

Description: This site explores the economic dimensions of the global biodiversity agenda as reflected in the work ofIUCN and the various biodiversity conventions, notably the Convention on Biological Diversity. The section on biodiversityfinance features resources and links to the financing of biodiversity.

Kloss, D. 2002. “Guide to Sustainable Financing of Biodiversity and Protected Areas.”

To download: http://www.conservationfinance.org/Documents/CFA%20Training%20Guide/GTZ-CF-Guide/guide.pdf.

Organization: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ).

Description: A compilation and brief analysis of many financing mechanisms at different levels. Intended as a tool forpractitioners, it briefly discusses the advantages and disadvantages of different financing mechanisms and lists sourcesfor obtaining further information.

Country case studies: Countries in Africa, Asia, Latin America, Australia, New Zealand, North America, Europe.

Financing options: Earmarking for SNRM financing a percentage of one or more charges, fees, fines, and penaltiesrelated to the use (or abuse) of natural resources (DC 2); user fees, entry fees directly collected by the SNRM project(DC 14); markets for landscape beauty, including ecotourism and tourism (DC 13); earmarking for SNRM financing apercentage of one or more general taxes collected at the national, state, or local level (DC 1); environmental funds(DC 4); direct investment by nonlocal investors (DC 11); debt-for-nature swaps (DC 4); multilateral/bilateral aid and devel-opment agencies (DC 5); markets for carbon offsets (DC 13); markets for development rights and conservationeasements (DC 13).

OECD. 2002. “Environmental Financial Strategies.” OECD, Paris.

To download: http://www.oecd.org/EN/about_further_page/0,,EN-about_further_page-499-nodirectorate-no-no--8-no-no-3,FF.html.

Organization: Organisation for Economic Co-operation and Development (OECD) (www.oecd.org).

Description: OECD has been assisting the Newly Independent States (NIS) of the former Soviet Union in strengtheningthe capacity of their domestic environmental finance mechanisms. This site provides guides and resources to plan thefinancing of environmental programs on a national scale.

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PROFOR. 2002. “Financing Sustainable Forest Management” [an online resource].

Web addresses: http://www.profor.info/pages/publications/financing_SFM.html.

Organization: Program on Forests (PROFOR) is a multidonor partnership that provides knowledge and capacity buildingto strengthen national forest programs in the pursuit of sustainable forest management (www.profor.info).

Description: As one of PROFOR’s analytical themes, the projects on financing sustainable forest management (SFM)report on developments in innovative financing strategies and marketing systems that support forest conservation andmanagement.

Financing options: Markets for environmental products and services (DC 12–15).

Spergel, B. 2001. “Raising Revenues for Protected Areas. A Menu of Options.”

To download: http://biodiversityeconomics.org/pdf/topics-226-00.pdf.

Organization: WWF (WWF-US), Washington, D.C.

Description: This paper describes 25 ways of raising revenue for protected areas. Intended as a tool for practitioners, itsummarizes the methods' relative advantages and disadvantages.

Country case studies: Philippines, Botswana, Uganda, Zimbabwe.

Financing options: Public budget funding of SNRM projects and programs (DC 1); debt-for-nature swaps (DC 4); socialand environmental NGOs (DC 9); foundations (DC 9); environmental funds (DC 4); earmarking for SNRM financing apercentage of one or more charges, fees, fines, and penalties related to the use (or abuse) of natural resources (DC 2);user fees, entry fees directly collected by the SNRM project (DC 14); markets for carbon offsets (DC 13).

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PUBLICATIONS ON FINANCING SNRM

Ashley, C., and B. Jones. 2001. “Joint Ventures Between Communities and Tourism Investors: Experience inSouthern Africa.” International Journal of Tourism Research, special issue on fair trade in tourism, Vol. 3, No. 2.

To download: http://www.propoortourism.org.uk/ashley_jones.pdf.

Description: This article reviews experiences in Namibia, within the wider regional context, to identify some key princi-ples and challenges. Several lessons can be learned from the eight Namibian negotiations, and the three negotiationson joint ventures.

Country case studies: Namibia (Damaraland Camp), Zimbabwe (CAMPFIRE), Botswana, South Africa.

Financing options: Markets for landscape beauty, including ecotourism and tourism (DC 13); private sector–communitypartnerships (DC 11); community-based enterprises, formal and informal (DC 10).

Bayon, R. et al. 2000. “Financing Biodiversity Conservation.” Inter-American Development Bank, Washington, D.C.

To download: http://www.iadb.org/sds/env/publication/publication_200_1887_e.htm.

Description: This report provides an overview of existing and experimental financing mechanisms that can be used toencourage the conservation and sustainable use of biodiversity.

Country case studies: Mexico (FMCN), Brazil (FNMA, PROBEM), Ecuador (FONAG), Costa Rica (FONAFIFO, MIGA, and theRainforest Tram), The Netherlands (Dutch Green Funds, The POPM Mechanism), Brazil (Terra Capital Fund).

Financing options: Environmental funds (DC 4); earmarking for SNRM financing a percentage of one or more generaltaxes collected at the national, state, or local level (DC 1); international development banks’ loans (DC 3); commercialbank loans (DC 3); environmental fund supported by user fees (DC 4, DC 2); special laws delivering extra-budgetaryfinancial support to particular social groups, geographical areas, or activities (DC 1); tax breaks or subsidies for SNRMactivities (DC 1); venture capital (DC 11); biodiversity conservation and bioprospecting (DC 13).

Ashley, C. et al. 2002. “Rethinking Wildlife for Livelihoods and Diversification in Rural Tanzania: A Case Studyfrom Northern Selous.” DFID London.

To download: http://www.odg.uea.ac.uk/ladder/doc/wp15.pdf.

Description: This paper recommends approaches within community-based conservation that would enhance livelihoodgains, including the contribution of wildlife-based enterprise to rural growth.

Country case studies: Tanzania.

Financing options: User fees, entry fees directly collected by the SNRM project (in this case trophy hunting) (DC 14);markets for landscape beauty including ecotourism and tourism (DC 13).

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PUBLICATIONS ON FINANCING SNRM (cont’d.)

ECLAC-UNDP. 2002. “Financing for Sustainable Development in Latin America and the Caribbean.” ECLACSantiago, Chile.

To download: www.eclac.org.

Description: An overview of financing for sustainable development in Latin America and the Caribbean at the country level.

Case study countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Trinidad and Tobago.

Financing options: Public budget funding of SNRM projects and programs (DC 1); special laws delivering extra-budgetaryfinancial support to particular social groups, geographical areas, or activities (DC 1); PES (DC 12–14); GEF payments forthe global commons (DC 15).

Chomitz, K. et al. 1998. “Financing Environmental Services: The Costa Rican Experience and its Implications.”World Bank, Washington, D.C.

To download: http://lnweb18.worldbank.org/ESSD/essdext.nsf/44DocByUnid/6B8781730D0A31BA85256B750002812D/$FILE/FinancingEnvironmentalServicesTheCostaRicanExperienceandItsImplications1998.pdf.

Description: This report examines Costa Rica’s efforts to develop systems of payments for environmental serviceswhere landowners can receive payments for adopting specified land uses. The program is financed in a variety of ways,including revenues from a fossil fuel sales tax, sales of certifiable carbon tradable offsets, and payments from privatepower plants.

Case study countries: Costa Rica.

Financing options: Markets for carbon offsets (DC 13); markets for watershed protection (DC 13); markets forlandscape beauty, including ecotourism and tourism (DC 13); earmarking for SNRM financing a percentage of one ormore selective taxes collected at the national, state, or local level (DC 2).

Bezanson K., and F. Sagasti. 2001. “Financing International Public Goods: Challenges, Problems and a WayForward.” Institute of Development Studies (IDS), Sussex, U.K.

To download: http://www.gm-unccd.org/FIELD/Bilaterals/Sweden/Sweden1.pdf.

Description: A study on the financing mechanisms for the provision of global public goods and supporting case studies.Two of the five case studies focus on natural resources: biodiversity conservation (developing useful products from biodi-versity) and climate change mitigation (DC 13, 14, 15).

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Ferraro, P. J., and R. D. Simpson. 2000. “Global Habitat Protection: Limitations of Development Interventionsand a Role for Conservation Performance Payments.” RFF, Washington, D.C.

To download: http://epp.gsu.edu/pferraro/docs/globalhabitatprotectioncb.pdf.

Description: The author argues that paying individuals or communities directly for conservation performance may be amore effective approach than indirect initiatives such as ecotourism or green products.

Case study countries: Costa Rica (FONAFIFO).

Financing options: Environmental fund (DC 4), PES (DC 13).

Gutman, P. 2001. “Forest Conservation and the Rural Poor: A Call to Broaden the Conservation Agenda.”WWF–MPO, Washington, D.C.

To download: http://www.panda.org/downloads/policy/Forest_and_Poverty.pdf.

Description: This paper addresses the causes of deforestation, and advocates paying the rural poor for their role asstewards of the world’s biodiversity (DC 12, 13).

Hardner, J., and R. Rice. 2002. “Rethinking Green Consumerism.” Scientific American, May.

To download: http://www.cciforum.org/pdfs/HardnerSciAmFinal.pdf.

Description: The authors argue that buying "green" products is not enough to save biodiversity in the tropics. Theyadvocate up-front payments for conservation that they term “conservation concessions.” The article provides someexamples from Conservation International activities in Latin America.

Case study countries: Peru, Guyana, Guatemala.

Financing options: Markets for development rights and conservation easements (DC 13).

Faust, Michael et al. 2001. “Global Public Goods: Taking the Concept Forward.” UNDP, New York.

To download: http://www.undp.org/ods/pub-d17-online.html.

Description: This book addresses several issues of the global public goods debate, from rethinking the definition ofpublic goods to applying the theory to global issues and to outlining steps for operationalization (DC 15).

Convention on Biological Diversity, Executive Secretary. 2002. “Financial Resources and Mechanisms (Articles 20and 21)."

To download: http://www.biodiv.org/doc/meetings/cop/cop-06/official/cop-06-14-en.pdf.

Description: This report provides an overview of financing mechanisms that have been proposed as part of governmentactivities related to the Convention on Biological Diversity (CBD).

Country case studies: General references to developing and developed countries.

Financing options: Tax breaks or subsidies for SNRM activities (DC 1); multilateral aid and development agencies (DC5); bilateral aid and development agencies (DC 5); private investment by local businesses (DC 10).

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Johnson, N. et al. 2001. “Developing Markets for Water Services from Forests: Issues and Lessons forInnovators.” Forest Trends, Washington, D.C

To download: http://www.foresttrends.org/resources/pdf/Developing_Markets_for_Water_Services.pdf.

Description: The report examines innovative international experiences in the emerging markets for hydrological services.It distills common issues and lessons from nine case studies and other experiences.

Case study countries: France, Colombia, United States.

Financing options: Payments for environmental services through self-organized private deals, water-user fees, tradingschemes, and public payment schemes (DC 13–15).

Kaul, I. et al. 1999. “Global Public Goods: International Cooperation in the 21st Century.” New York: OxfordUniversity Press.

Description: Part of the works sponsored by UNDP to explore what global public goods are and how to pay for them(DC 15).

Landell-Mills, N., and I. Porras. 2002. “Silver Bullet or Fools’ Gold? A Global Review of Markets for ForestEnvironmental Services and Their Impact on the Poor.” IIED, UK

To download: : http://www.iied.org/docs/enveco/MES_prelims.pdf (executive summary only).

Description: This is a global review of emerging markets for carbon sequestration, biodiversity conservation, watershedprotection, and landscape beauty. In total, 287 cases are reviewed from a range of developed and developing countries.Chapter 2 summarizes the findings.

Country case studies: Surinam, Africa, Costa Rica, Colombia, Ecuador, United States, Fiji, and others.

Financing options: Payments for environmental services (DC 13–15).

IFAD. 2002. “Rural Finance for the Poor. From Unsustainable Projects to Sustainable Institutions.” InternationalFund for Agricultural Development, Rome.

To download: http://www.ifad.org/pub/other/rural_e.pdf.

Description: Reviews IFAD’s experience with financing peasants and small farmers in developing countries. A strongemphasis is put on self-financing and local credit schemes.

Case study countries: Indonesia, Guatemala, countries in Eastern Europe, Nepal, Tanzania, Philippines.

Financing options: Micro-saving, micro-credit, and micro-insurance (DC 10).

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Mayers, J., and S. Vermeulen. 2002. “Company-Community Forestry Partnerships; From Raw Deals to MutualBenefit.” IIED, London.

To download:, http://www.iied.org/psf/pdfdocs/partnershipsbook/PSF_prelims_partners.pdf (executive summary only).

Description: This report examines 57 cases of partnerships in forestry in 23 countries, from informal arrangements andsocial responsibility efforts to outgrower schemes and joint ventures.

Case study countries: South Africa, India, Indonesia, Papua New Guinea, Ghana, Canada.

Financing options: PES, PEP (DC 13–15), private sector–community partnership (DC 11).

Nasi, Robert et al. 2002. “Forest Ecosystem Services: Can They Pay Our Way Out of Deforestation?” Center forInternational Forestry Research (CIFOR), Bogor, Indonesia.

To download: http://www.catie.ac.cr/cecoeco/Forest percent20Ecosystem percent20Services.doc.

Description: This paper provides an overview of what forest ecosystem services are and what they represent, as well asthe issues of price and valuation. Both private and public financing sources are considered.

Financing alternative: PES (DC 13, 15).

Pagiola, S., J. Bishop, and N. Landell-Mills. 2002. “Selling Forest Environmental Services: Market Mechanisms forConservation and Development.” London: Earthscan.

Description: The 12 articles contributed to this book are case studies of financing mechanisms for forest services.

Case study countries: Costa Rica, India, United States, Ecuador, El Salvador, Chile, Brazil, Mexico, Australia, Bolivia.

Financing options: Different types of payments for environmental services, and payments for environmental products(DC 12–15).

McNeely, J. 1999 . “Achieving Financial Sustainability in Biodiversity Conservation Programmes” IUCN, Gland,Switzerland.

To download: http://economics.iucn.org.

Description: An overview of financing options for conservation.

Case study countries: Global examples.

Financing options: Markets for carbon off-sets (DC 13); earmarking for SNRM financing a percentage of one or morecharges, fees, fines, and penalties related to the use or abuse of natural resources (DC 2); PES (DC 13); private invest-ment by local businesses (DC 10); debt-for-nature swaps (DC 4); special fundraising campaigns (DC 8); environmentalfunds (DC 4).

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Perrot-Maitre, D. and P. Davis. 2001. “Case Studies of Markets and Innovative Financial Mechanisms for WaterServices from Forests.” Forests Trends, Washington D.C.

To download: http://www.forest-trends.org/resources/pdf/casesWSofF.pdf.

Description: This paper presents the background cases for the Johnson, N. et al. (2001) paper above. It is a detailedpresentation of various types of financing mechanisms in various settings.

Case study countries: France, Costa Rica, Colombia, United States, Australia, Brazil.

Financing options: Different types of payments for environmental services (DC 12–15).

Powell. I. et al. 2002. “Developing Markets for the Ecosystem Services of Forests.” Forest Trends, Washington, D.C

To download: http://www.forest-trends.org/resources/pdf/powellwhite_ecoservices.pdf

Description: An overview of opportunities to market forests’ environmental services.

Case study countries: Colombia, Costa Rica, Australia, United States, France, China.

Financing options: Different types of payments for environmental services (DC 12–15).

Quintela, C et al. 2002a. “Financing Arrangements in GEF-Supported Biodiversity Projects.” Conservation FinanceProgram, Wildlife Conservation Society (WCS), Washington, D.C.

Description: The study examined financing arrangements in support of the objectives of GEF biodiversity projects,including a review of the GEF portfolio and an in-depth review of 18 GEF-supported projects.

Case study countries: Côte d’Ivoire, Burkina Faso, Romania, Nepal, Costa Rica.

Financing options: Community-based enterprises, formal and informal (DC 10); different cases of payments for environ-mental services (DC 12–15).

Pagiola, S. et al. 2002. “Generating Public Sector Resources to Finance Sustainable Development—Revenueand Incentive Effects.” World Bank, Washington, D.C.

To download: http://wwwwds.worldbank.org/servlet/WDS_Ibank_Servlet?pcont=details&eid=000094946_03020504033653.

Description: This paper discusses how developing countries can generate some of the resources they need for sustain-able development, by eliminating harmful subsidies and better capturing natural resource rents. Besides providing adescription of various alternatives, the paper attempts a rough estimate of the magnitude of resources that might begenerated or made available by a variety of public sector actions.

Case study countries: Global examples.

Financing options: Freeing up existing public resources (DC 6); conservation concessions, ecotourism, and market-based instruments (DC 11, 12); environmental taxes, pollution charges, user-fees, value-added taxes, environmentalfunds (DC 1–4).

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Richards, Michael. 1999. “Internalizing the Externalities of Tropical Forestry: A Review of Innovative Financingand Incentive Mechanisms.” Overseas Development Institute (ODI), London.

To download: http://www.odi.org.uk/fpeg/publications/papers/eutfp/eutfp-01.pdf.

Description: This paper assesses the potential and limitations of a range of "innovative" financing mechanisms. It findsthat efforts to increase the incentives for sustainable forestry must be accompanied by effective regulation or control,whether at the national or international level, and should be complemented by policy measures to make forest-degrada-tion activities less profitable.

Case study countries: Costa Rica, Niger, Nepal.

Financing options: Different payments for environmental products and payments for environmental services(DC 12–15).

Roe, D. et al. 2001. “Getting the Lion’s Share from Tourism: Private Sector–Community Partnerships inNamibia.” IIED, London.

To download: http://www.propoortourism.org.uk/namibia_vol1.pdf.

Description: This report reviews the current experience of private sector–community partnerships within the tourismindustry in Namibia and provides guidelines and practical advice for the development of future partnerships. Chapter 6summarizes the findings.

Case study countries: Namibia.

Financing options: Private sector–community partnerships (DC 11).

Scherr, S. et al. 2002. “Making Markets Work for Forest Communities.” Forest Trends, CIFOR, Washington, D.C.

To download: http://www.futureharvest.org/pdf/Final_Report.pdf.

Description: This policy brief lays out strategies to improve the contributions of forest markets to local livelihoods.

Case study countries: Latin American countries.

Financing options: Different payments for environmental products and services (DC 12–15).

Quintela et al. 2002b. “Literature Review of Financial Arrangements.” Draft, Conservation Finance Program, WildlifeConservation Society (WCS), Washington, D.C.

Description: A review of the literature on financing mechanisms for biodiversity conservation.

Case study countries: Brazil (ICMS Ecológico), Mexico (FFEM), Nepal, Costa Rica, Mali.

Financing options: Earmarking for SNRM financing a percentage of one or more selective taxes collected at thenational, state, or local level (DC 2); environmental funds (DC 4); community-based enterprises, formal and informal (DC10); markets for non-timber forest products (DC 12).

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Tognetti S. 2001. “Creating Incentives for River Basin Management as a Conservation Strategy—A Survey ofthe Literature and Existing Initiatives.” WWF, Washington D.C.

To download: http://www.biodiversityeconomics.org/pdf/topics-336-00.PDF.

Description: This report provides an overview of existing initiatives to create economic incentives for river basinmanagement as a strategy for protecting biodiversity. It also identifies key issues that need to be considered when evalu-ating the feasibility of this approach in a particular ecoregion, as part of an overall conservation strategy.

Case study countries: United States, Ecuador, Colombia, Costa Rica, China, South Africa, Chile.

Financing options: Different payments for environmental services and environmental products (DC 12–15); forestryfunds (DC 4); government investment in conservation (DC 1); water source protection funded by the government andinternational donors (DC 1, 2); encouraging the mobilization of private resources (DC 6).

Whiteman, A. 2001. “Financing Sustainable Forest Management: Constraints and Opportunities.” Working paperon financing sustainable forest management, FAO, Rome.

To download: www.fao.org.

Description: This is the summary of more than a dozen papers, produced as part of FAO’s program on “FinancingSustainable Forest Management,” that include several case studies in Central African countries.

Financing options: Public sources (DC 1–3).

World Bank Group. 2003a. “Prototype Carbon Fund” [an online resource].

Web address: http://prototypecarbonfund.org/router.cfm?Page=About.

Description: The operational objectives of PCF are mitigating climate change, demonstrating the possibilities of public-private partnerships, and offering a "learning-by-doing" opportunity to its stakeholders.

Case study countries: Worldwide examples.

Financing options: Market for carbon offsets (DC 13).

Shilling, J., and J. Osha. 2003. “Paying for Environmental Stewardship.” WWF–MPO, Washington, D.C.

To download: www.panda.org/mpo.

Description: This report reviews institutional arrangements that may support paying the rural poor for environmentalstewardship.

Case study countries: India, Nepal, Costa Rica.

Financing options: Public sources, development banks (DC 1–3); earmarking fees (DC 2); encouraging the mobilizationof private resources (DC 6).

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Zedillo, E. et al. 2001. “Recommendations of the High-Level Panel on Financing for Development.” UN, New York.

To download: http://www.un.org/esa/ffd/a55-1000.pdf.

Description: This is the report of a high-level expert group convened by the UN as part of the 2002 conference onFinancing for Development. Among other recommendations the expert group suggested putting into place a system ofpayments for global commons, including environmental services.

Financing options: Funds for SNRM associated with international treaties, other possible systems of internationalpayments for the global commons, earmarking for SNRM part of one or more international taxes (DC 15).

World Bank Group. 2003b. Environmental Economics Group [an online resource].

Web address: http://www.worldbank.org/environmentaleconomics.

Description: The World Bank Environmental Economics Group’s Web site offers conceptual and empirical information onsystems of payments for environmental services.

Case study countries: Worldwide examples.

Financing options: Payments for environmental services (DC 13–15), international development banks’ loans (DC 3).


WHERE TO CONTACT US

Please direct your comments and suggestionsregarding this Survey of Financing options forSustainable Natural resource management tothe following:

At WWF-MPO

Pablo GutmanSenior Policy AdvisorWWF–MPO1250 24th St. N.W.Washington D.C. 20037-1193USATel: 1 202 778 9740Fax: 1 202 293 9211Email: [email protected]

At Danida

Andreas Jensen, Technical AdviserBFT.6 Environment and Natural ResourcesRoyal Danish Ministry of Foreign AffairsAsiatisk Plads 2, DK-1448Copenhagen K, DenmarkTel: (+45) 3392 0220 or 3392 0207Fax: (+45) 3392 0790Email: [email protected]

Danida’s Working Group on Sustainable Financing of NRM, coordinator

Ole Meretz, Associate Professor, Ph.D.Institute of GeographyUniversity of CopenhagenOster Volgade 10, 1350 Conpenhagen K, DenmarkSwitchboard: +45 35 32 25 00Direct phone: +45 35 32 25 29Fax: +45 35 32 25 01Email: [email protected]

At IIED

Maryanne Grieg-Gran, Acting DirectorEnvironmental Economics Programme IIED3 Endsleigh StreetLondon WC1H 0DDTel: 20 7388 2117Fax: 20 7388 2826Email: [email protected]

At WWF-DK

John Kornerup Bang, Policy OfficerGlobal Environment ProgramWWF DenmarkRyesgade 3FDK – 2200 Copenhagen NSwitchboard: +45 35 36 36 35Direct phone: +45 35 24 78 44Fax: +45 35 24 78 [email protected]